How Kenya Increased GDP 25% Overnight, and Who’s Next?

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Last month, Kenya revised its GDP upwards by over 25%, from $55.2 billion to $44.1 billion. This increase was not due to a recent push to develop the economy, but due to a statistical quirk related to poor record keeping. Nor was this increase in GDP a new technique; Nigeria revised its GDP upwards by over 89% in April of this year! Here is the list of notable GDP revisions in Africa recently:

AfricaGDPrevisionsGiven the single-digit GDP growth rates in most of the world, even a 25% increase is staggering. So what’s behind them?

Using A New Base Year To Update GDP

A country’s gross domestic product is calculated by first surveying and reporting on the businesses and industries in a country. By comparing the growth in these sectors, a country can calculate its GDP but it uses a base year to compare all future numbers against.

The GDP revisions are a result of GDP “rebasing”, where the base years used to calculate GDP numbers are updated using more recent data. While the IMF suggests a rebasement every 5 years, many countries in Africa do not have the resources to conduct the data collection necessary to accomplish this. This leads to incredibly outdated economic data that omits entire industries completely.

For more information, read this article by Morten Jerven, a professor who is an expert on these matters having written a book, Poor Numbers, on how unreliable African development statistics can be.

In Kenya’s case, they updated their base year from 2001 to 2009. For Nigeria, they rebased from 1990 to 2010, a huge 20 year jump; considering the advance of technology alone in that time-frame, and you get an idea of how GDP increased by 89%.

Who Will Revise GDP Next?

By looking at the current base years used by countries in Sub-Saharan Africa, we should be able to identify likely candidates for future large GDP revisions. Unfortunately, like the data itself, it is extremely hard to find and very inconsistent. According to this paper, two main sources are the World Bank and the IMF, but their data is often contradictory. Another source is Morten Jerven, who visited many of the statistics offices himself to find data, which also conflicted with the World Bank and IMF data.

According to this data, the following countries in Sub-Saharan Africa are using a base year from 2000 or before and therefore highly likely to revise GDP numbers in the future:

  • Burkina Faso (1999)
  • Cameroon (2000 or 2002)
  • Cape Verde (1980)
  • Chad (1995)
  • Comoros (1990 or 2000)
  • Demcratic Republic of Congo (2000)
  • Republic of Congo (1990)
  • Cote D’Ivoire (1996 or 2000)
  • Djibouti (1990)
  • Eritrea (2000)
  • Ethiopia (2000)
  • Madagascar (1984 or 2000)
  • Mali (1997)
  • Morocco (1998 or 1999)
  • Senegal (1999 or 2000)
  • Tunisia (1990)
  • Zambia (1994)

That means almost half of Sub-Saharan Africa is using base years from before this century!

Conclusion

The reliability of economic data in Africa is decidedly lacking. The two papers/articles we’ve linked to above also provide other information regarding the issues that many African governments face when compiling their own data. This is an issue common in many frontier market countries, and also to emerging markets; China’s own premier has been cited as skeptical about their own data, focusing instead on three main “harder to fake” data points. Either way, this means that next time you read about an economy growing in high double digits overnight, you know to chalk it up to statistics rather than true growth.

photo credit: ollipitkanen via photopin cc

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