Finance Minister Rebuts Opposition’s Claims


Minister of Finance and Planning, Dr. Omar Davies has rejected suggestions by Opposition Spokesman on Finance that government had attained its fiscal deficit target by facilitating the inflation of the 2003/04 Gross Domestic Product (GDP) figures.
Dr. Davies emphasized that Jamaica’s data collection agency, the Statistical Institute of Jamaica (STATIN) had a world-wide reputation of excellence and integrity. “Neither political party, either in Government or in Opposition, has sought to question this integrity. Even if any member of the political directorate were so inclined, the professionals at STATIN defend their independence with great zeal,” he stated.
Underscoring that the GDP figures were the exclusive responsibility of STATIN, Dr. Davies said, in fact, he had been unaware of the outturn for the fiscal year either in terms of real growth or nominal GDP until a few days before his Budget presentation. “Therefore, I wish for the public to understand that there has never been and there is no question of political interference in those matters,” he declared.
Explaining how nominal GDP was calculated, Dr. Davies said the size of the GDP was a reflection of the level of economic activity in the country within any specified period. “By definition, since that activity has a value in current terms, the GDP in current or nominal terms must reflect inflation and hence nominal GDP, ceteris paribus, in a year with increased inflation, will grow more quickly than in a year when inflation is low,” he pointed out.
Dr. Davies further stated that there were well-established statistical techniques for correcting the impact of inflation, such as a “deflator” which then reflected the GDP in constant terms. “But the nominal GDP does reflect the actual value of our economic activity in current dollar terms for any specified period. There can be no other way around it,” he said, adding, “the debt is calculated in nominal terms, expenditure is stated in nominal terms; the deficit is stated in nominal terms and hence all comparisons are made, based on current dollars”.
Refuting further assertions that the GDP was recently inflated by 15 per cent to prop up the fiscal target, Dr. Davies said the increase in nominal GDP was not unusual and pointed out that in 1983 nominal GDP increased by 19.2 per cent, compared to the previous year, while in 1984 it increased by 34.8 per cent. In 1985 it increased by 24.7 per cent and by 22.4 per cent in 1986.

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