A June revision in the way the government measures gross domestic product (GDP) has substantially altered the kingdom's macroeconomic performance over the past five years, showing a larger economy, with a larger non-oil private sector, than was previously reported. As a result of the changes, per capita GDP is now estimated at some 15 per cent higher, at $8,465, than had been thought. But 2001 real GDP growth has been revised downwards to 1.2 per cent from 2.2 per cent.
Under the changes, the Central Department of Statistics now uses 1999 as the base year for measuring economic growth, rather than 1970, which is regarded as inaccurate because it pre-dates the oil boom and the development of Saudi industry. It has also recalculated the size of the kingdom's private non-oil economy, adding a further SR 60,000 million ($16,000 million) to the size of the economy as a whole from 1996 onwards.
As a result, 2001 GDP is now calculated at SR 637,280 million ($169,941 million), a sharp increase on the figure of SR 637,280 million ($169,941 million) that had been released earlier in the year. GDP in 2000 has also been raised, and now stands at about SR 706,660 million ($188,443 million), a 9 per cent increase on the earlier figure. Saudi American Bank (Samba), in its mid-year report on the economy, said the changes improve the data available for the economy, but highlight its previous shortcomings.
Real GDP growth figures have also been affected, with 2001 growth now standing at 1.2 per cent, as opposed to the 2.2 per cent recorded under the old system. Despite the fall in oil sector real growth as a result of lower production figures, the non-oil private sector grew by 3.5 per cent in 2001, a healthy figure, but below potential. 'A systematic under-measurement of the non-oil private sector economy was rectified,' said the Samba report. 'We have noticed for some time that money supply, adjusted for inflation, was growing steadily faster than real GDP, and it shouldn't, suggesting to us that non-oil private sector GDP was being under-measured.'
The changed figures are reflected in ratios of economic health: the budget deficit-GDP ratio now stands at 3.6 per cent and the public debt-GDP ratio is now 90 per cent, falling from 3.9 per cent and 99 per cent respectively. The changes are generally positive, but the budget deficit is no better for representing a smaller proportion of the economy. And the same goes for government debt. As the Samba report observes: 'The upward revision of GDP is equivalent to one buying larger size clothes in order to feel he is not gaining so much weight. The size of government debt, and its burden on the budget, remains the same, just as a step onto the debt scales would demonstrate.'
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