Former Central Bank Governor accuses govt. of meddling with GDP calculations

• Notes a highly dubious adjustment was made to nominal GDP to push 2016 growth rate from 2.2 % to 4.4 %
• Economic Affairs Ministry official says anything can happen with change of base year

By Nishel Fernando

Former Central Bank Governor Ajith Nivard Cabraal yesterday claimed that the government has meddled with GDP calculations in 2014, 2015 and 2016 to increase the real GDP growth rate of 2016 from 2.2 percent to 4.4 percent.

“GDP deflator seems to have been misused and utilized to adjust the real GDP over the past three years, which is a highly controversial practice,” Cabraal charged.
“A highly dubious adjustment was made to nominal GDP to push the 2016 growth rate from 2.2 percent to 4.4 percent. Rs.231 billion pertaining to 2015 was arbitrarily deducted from 2015 and ‘accounted’ for in 2016.

As per 2016 Central Bank annual report, the nominal GDP for 2016 was reported as Rs 11,839 billion, while the nominal GDP for 2015 was stated as Rs 10,952 billion.

Accordingly, the increase in nominal GDP for 2016 was reported as Rs.887 billion, which is a percentage increase of 8.1 percent. Thereafter, by deducting the reported GDP deflator of 3.6 percent and making a further adjustment of 0.1 percent, the real growth for 2016 was reported as 4.4 percent.” Cabraal elaborated.
He also expressed his doubts over the GDP calculations for the past year where Sri Lanka had recorded its lowest GDP growth rate since 2001.

“The increase of GDP at current market prices for 2017 of Rs.1, 383 billion seems phenomenally high in a year where there was general consensus that economic activity was quite stagnant.

“Further studies will need to be made in this regard to ascertain reasons for this situation, particularly in the backdrop of the obvious manipulation of the growth statistics last year,” he said.

However, speaking to Mirror Business, a top National Policies and Economic Affairs Ministry official defended the Department of Census and Statistics, pointing out that it has acted independently and in a transparent manner in changing the base year for GDP calculations from 2002 to 2010 in 2015.

“When you change the base year anything can happen, as the new economic activities were being added to national accounts,” 
he said.
“It’s a practice to change the base at pre-decided intervals, until 2010 the year 2002 was used as the base year. After 2002, a lot of new economic activities emerged in the country. To account for these new economic activities we had to move the base year from 2002 to 2010 in 2015,” he explained.

The official also noted that the Department of Census and Statistics will soon again change the base to 2015 from 2010.

“It’s not a simple task and we are currently working on it,” he said.

Cabraal also said that the Central Bank acted in a more independent and transparent manner during his 9-year tenure as the Governor.

Current govt. only attracted US $17mn in FDI: Godahewa

The former Securities and Exchange Commission Chairman Dr. Nalaka Godahewa says, the current government has attracted only US $ 17 million, though Sri Lanka recorded the highest ever Foreign Direct Investment (FDI) figure of US $ 1.63 billion in 2017.

Godahewa said that most of the FDI that flowed into projects last year were initiated by the former regime.

According to him, the Colombo Port City attracted the highest amount of FDI of US $194 million while Shangri-La attracted US $185 million, followed by the Slave Island Mixed Development project which brought in US $100 million in FDIs.

He said US $309 million came for projects approved during the current government, though US $292 million came from the lease payment made by the Chinese as the first tranche related to the Hambantota port deal.

Godahewa said the former government was on route to achieve US $5 billion in FDI by 2017.

In addition, he said Dialog Axiata, Sri Lanka Telecom, Airtel, Havelock City, Overseas Reality and Unilever attracted US $85 million, US $60 million, US $45 million, US $43 million, US $43 million and US $37 million respectively during 2017.