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Tuesday, August 12, 2008

Turkey National Accounts Revision

This post is a bit belated, but I am only now finding the time to go through the Q1 2008 data for the Turkish economy. Basically in March 2008, the Turkish Statistical Institute released revised national accounts data for the period 1998 to 2007. The revision, which completes a four-year exercise that involved technical assistance from the IMF and Eurostat, largely aligns standards and methodologies with the European System of Accounts 1995 and introduces a more recent base year (1998 instead of 1987). The revised national accounts data are now based on sources that have a broader coverage of formal and informal economic activity. The new Census of Industry and Business Establishment, in particular, represents a marked improvement in the coverage of economic activity in manufacturing (surveying 28,000establishments versus 11,000 for previous annual surveys), mining, and business and personal services.

Similarly, the new Labor Force Survey provides a better yardstick to measure the extent of the informal sector due to its increased sample size and accuracy. The incorporation of the 2000 Building Census, which shows a significantly greater stock of housing than previously estimated, also resulted in a significant upward revision to the value of paid and imputed rental services. Meanwhile, the use of finer levels of statistical disaggregation of products resulted in a much more reasonable series for changes in inventories, which in the previous national accounting system had reached implausible levels.

The new national accounts data feature an upward revision of nominal GDP for the years 1998-2006 of between 26 and 32 percent. On the production side, the revisions imply, above all, a larger weight of the service sector. This is matched, on the expenditure side, by a large upward revision in private consumption with balancing reductions in the investment and export shares.

The revision also altered recent growth dynamics somewhat, due to changes in relative prices resulting from the updating of the base year and improvements in methodology and coverage. The revised data show a smoother overall growth profile since 1998, with less contraction during the 2001 crisis, a commensurately weaker rebound, and somewhat stronger growth since 2004. Average growth over the period 1998-2006 increased by 0.4 percentage points, from 3.7 percent to 4.1 percent per year.

The data revisions naturally imply changes to several key economic indicators. The
upward revision to GDP has allowed Turkey to climb the ladder of international rankings of per capita income. At the same time, public debt and the current account deficit are now much lower in relation to GDP. However, gross external financing requirements remain the same in dollar terms, and several commonly used indicators of solvency, such as the ratio of public revenue to public debt and the ratio of exports to external debt, also remain unchanged. Meanwhile, several other indicators have worsened. The decline in the ratio of tax receipts to GDP, for example, suggests even less efficient tax collection than previously thought.

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