Misleading numbers

Spin doctor

Spin doctor

The other day Kuensel reported that: Bhutan’s gross domestic product (GDP) growth slumped to one of its lowest at 5 percent in 2008 despite the Druk Phuensum Tshogpa’s target of achieving a 9 percent growth rate annually.

To this Dr Saamdu Chetri, the head of good governance section in the cabinet secretariat and DPT party member, was quoted as saying: “With inflation going up to 9.2 percent and a global recession, a growth rate of five percent is still an achievement.”

There’s no doubt that the recent global recession would have constrained economic growth. So there could be some truth in Dr Saamdu’s claim that, given the recession, a 5% growth in GDP is an “achievement”.

But claiming that a 5% economic growth is an “achievement” because we experienced inflation of up to 9.2% is misleading. Inflation offsets real growth. So if inflation was 9.2%, then in real terms our economy did not grow by 5%; it would have actually shrunk by 4.2% during 2008.

 

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  1. Hey Hey Hey!

    It is very IMPORTANT to keep in mind that the growth rate figure reported are already adjusted for inflation. For an example, if the GDP was calculated to be 4% higher than previous year and the inflation was calculated as 2% during the same period of time, the GDP growth will be reported as 2% ( i.e 4 – 2 ). This is just an overall concept, there are so many factors involved in reporting the growth rate.

    It does not make much sense when a person refers to another person as “spin doctor” without actually understanding the concepts behind the issues.

    • Dear Sonam:

      Thank you for the important correction. You are correct. Kuensel had reported a GDP growth rate of 5%, and I assumed that that was at current prices. The National Statistical Bureau confirms that 5% is a constant growth rate at 2000 prices.

      I offer Dr Saamdu my complete and unreserved apologies for writing that what he said in Kuensel was “misleading”, and for calling him a “spin doctor”.

      Tshering

    • i don’t think when a country faces 9.4 percent inflation, it will not have growth rate. inflation is linked to devaluation of money at current rate — like nu. of 2008 might equal to ch 90 in 2009. but gdp is sum totla of national production. it is comapared with total production last year.

      and also remember, inflation was for a short period. that didn’t last for long. i think it was only one of the months last year country faced that inflation, while other time, it was well.

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