Sri Lanka revises 2015 to 2021 economic growth rates

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Newly adjusted (re-based) series of national accounts estimates will be submitted to the Cabinet for approval this week, Director General of the Department of Census and Statistics (DCS) P.M.P. Anura Kumara told Finance Today.

“We have almost finalised our work and hopes to submit the new series of National Accounts, preliminary estimates, revising the base year from 2010 to 2015 to the Cabinet for approval this week (Monday),” he said.

Therefore, all the National Accounts and Data Reports released from 2015 to 2021 will be adjusted according to the new 2015 base year and submitted for approval, he said.

This, adjusted data will be made available for local and foreign use in the future.

Accordingly, the Central Bank of Sri Lanka (CBSL) has also decided to revise this year’s economic growth forecast based on the first quarter GDP data of this year, a senior official said.

The proposed figures rely on re-basing the country’s national accounts compilation undertaken by DCS. The most current approximations were based on 2010 production and consumption patterns.

On average every five years we change the base year according to international recommendations.  It is the process of replacing an old base year with a more recent base year. What this means is aggregates at constant prices are recalculated in terms of more recent prices. This gives a reference point to which future values of the GDP are then compared to. The international recommendation is to select a much recent and stable year in main economic indicators such as money supply, interest rates and price indices as the base year.  Accordingly, DCS has decided to use 2015 as the new base year.

According to DCS the rebasing of national accounts provides a wide range of benefits such as it will adopt recommendations of the System of National Accounts, 2008 (2008 SNA) which has been jointly prepared by the United Nations, World Bank, International Monetary Fund, Organisation for Economic Cooperation and Development and the European Union. It also describes the real size and rate of movement of the economy during a given period of time as well as it will  improve the quality, accuracy and reliability of estimates. It will improve the international comparability of the GDP and also adopt other internationally recommended improvement to the national accounts compilation system.

The rebasing of GDP brings some impacts on macro-economic indicators such as, increase in nominal GDP, which will lead to increase in per-capita income.  It also changes the production structure. It also changes the macroeconomic indicators such as budget deficit, investment rate, savings rate, tax rate etc.

By Ishara Gamage