Bigger+economy+is+a+fact,+Mariam+Isa,+Weekender

Business Day Weekender, 12 May 2007
=Bigger economy ‘is a fact’=


 * MARIAM ISA**

THERE IS mounting evidence to suggest that SA’s economy is significantly larger than suggested by the latest official estimates, which is likely to prompt modest upward revisions to the country’s growth rate over the past five years, according to analysts.

Unisa’s Bureau for Market Research (BMR) sparked a heated debate with a recent report saying the country’s gross domestic product (GDP) was about 9% larger than measured by Statistics SA during last year.

Economists say the latest official labour earnings survey supports that research, along with the government’s tax amnesty for small business, which has boosted the number of officially registered companies by 35000 in the past few months.

“In the bigger scheme of things it’s not an opinion, it’s a fact," said T-Sec economist Mike Schussler.

“We are very likely to see a larger economy when all the new data is taken into account."

BMR research head Carel van Aardt said banking data monitored by his organisation showed that total household consumption expenditure exceeded official estimates for 2006 by R155bn, or 9%.

That conclusion was based on figures which showed that 75% of the banking sector’s wealthiest clients were self-employed in 2005, compared with 25% 10 years ago. Even if they paid all their taxes, their spending and business value had not been adequately reflected in GDP data, partly because it was harder to get survey information from affluent households, he said.

“We have probably been underestimating the level of the economy for the past decade, mainly because of rapid growth in the informal sector in the first economy — there has been a large number of affluent people not registering their businesses if they run them from home," he said.

Growth in value added tax (VAT) backed this theory because it had outstripped GDP growth over the past few years. Schussler said that VAT now accounted for 8% of GDP compared with 5-6 percent a few years ago.

The BMR’s conclusions were also supported by Stats SA’s latest quarterly earnings survey, which revised the number of employed workers and average earnings up in the third quarter of last year. This prompted a R110bn upward revision in national income for that year, which has not yet been accounted for in GDP data.

“We are taking a cautious approach to the BMR research," said Stats SA’s national accounts manager, Joe de Beer. “It would be premature to adjust our figures based on one piece of research.”

Other officials at Stats SA said the organisation’s income and expenditure survey — which is produced only every five years — would provide more input for its regular revisions to annual GDP in November. The survey, due in the second half of this year, was likely to lead to slightly higher annual growth estimates, they said.

Even if SA’s growth rate does not rise markedly, a larger economy will improve many key ratios based on GDP, such as the size of the current account deficit, household debt and spending.


 * From: http://www.businessday.co.za/weekender/article.aspx?ID=BD4A460234**

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