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October 22, 2014
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INDEC to unveil GDP

Economy Minister Axel Kicillof announces February’s inflation index alongside INDEC Technical Director Norberto Itzcovich last week.
By Fermín Koop
Herald Staff

Will determine whether state pays warrants

The INDEC statistics bureau will announce today the country’s gross domestic product (GDP) from the last quarter of 2013, which could exceed a growth rate of four percent.

The figure will be based on the bureau’s revised methodology, its director Norberto Itzcovich confirmed on Tuesday — without going into any details — and will determine whether or not the government pays out GDP warrants.

Under the term of the GDP warrants, a financial instrument created as part of the country’s debt restructuring, a payment of between US$3.5 billion and US$4 billion would have to be made if the economy’s annual growth rate exceeds 3.2 percent, a scenario that is likely to unfold given the monthly EMAE economic activity index — a close proxy for GDP — which estimated a growth rate of 4.9 percent last year.

The new methodology implies a change of the base year — used to measure growth at constant prices — that was 1993 and will now be 2004. The update would have an impact on the figures of the last quarter of 2013 but not in the rest of the periods of the year, which were measured with the previous methods. The government will also unveil today the first EMAE index of the year, which was calculated with the new methodology.

In anticipation of the announcement, opposition politicians published their own “Congressional GDP” and claimed the country’s economy grew 2.9 percent last year, not 4.9 percent. According to their figures, which take an average of the data obtained from private consultancies, the economy slowed 0.6 percent in the last quarter of 2013 compared to the two-percent growth registered for the same month in 2012.

“There won’t be any surprises on Thursday. Economic growth similar to the one reported by the EMAE will be announced by the INDEC,” Mariano Kestelboim, University of Buenos Aires economist, told the Herald. “The statistics are based on a price index that was proven to be wrong. That affects GDP calculations, which will show growth that is higher than the real figures.”

The International Monetary Fund had asked the federal government to publish a new price index and review its GDP figures in order to lift the “motion of censure” it had issued on February 2013 due to the lack of credibility surrounding Argentina’s inflation and economic growth data. The government has already announced a new national price index, which reported inflation at 3.7 percent in January and 3.4 percent in February

“We’ll have to wait and see the details of the methodological changes but I imagine the IMF could lift the sanction after this. There are no reasons not to do it,” Andrés Asain, economist and head of the Scalabrini Ortiz Study Centre, told the Herald. “A better economic growth index would be very good for the country given the currently expensive interest payments of the GPD bond.”

A joint investigation by University of Buenos Aires and Harvard economists published last year suggested that in 2008 the government changed the methodology it used to measure GDP, which forced it to pay more than it had to in bond payments, as the threshold for GDP bonds was exceeded. If no changes had been made, the economists said, the economy would have grown 15.9 percent between 2007 and 2012, and not the reported 30 percent. INDEC officials rejected the investigation and denied changes had been made to the methodology.

@ferminkoop

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