Hongkong GDP figures continue to stagger
the imagination. Why are the likes of the IMF so keen to accept as gospel
numbers which so inaccurately reflect reality? And why are HK's budget
numbers so uncertain so late in the year? SCMP
You do not need to be a mathematician to be Financial Secretary. But
a basic grasp of arithmetic helps. Of course we all have problems with
statistics from time to time but it is important to beware of the temptation
to jump at numbers we like even when they do not add up. Donald Tsang
must surely have had some doubts in the back of his mind last week when
he simultaneously crowed about Hongkong's supposed 10.4% third quarter
growth rate while warning of a rising budget deficit and problems ranging
from the US election to oil prices and local investors' losses from
technology shares (dot com scams perpetrated by leading local businessmen,
I have noted in this column before the unreality of government GDP
data. This is not to say that it is being manipulated. Merely that the
method produces results which are a nonsense. It is curious how not
only the ever gullible International Monetary Fund takes the data at
face value but some of the world's highest paid economists - the brokerage
and investment bank salesmen/analysts - do not bother to analyse it.
For the record, using the official data, Hongkong's GDP in term of actual
current Hongkong dollars in the third quarter was HK$327 billion. The
figure for the same period on 1999 was HK$317 billion. The increase
was thus 3.15%. So how do we get to 10.4%?
By using a deflator of minus 6.6% -- in other words, and in lay terms,
prices for the economy as a whole have fallen by that amount. Of course
we know this is not true because most of the government data, as well
as our own observations and bank accounts, tells us that this is not
so. For example, the composite consumer price index - and consumption
represents two thirds of expenditure -- fell by just 2.8%.
Even that is an exaggeration for the vast majority who are not in the
private rental sector which is the major component of the housing cost
index which has a 29% weighting in the overall index. Exclude this private
residential rent sector, which fell 8.2%, and prices were roughly static,
with declines in food, clothing and durable goods being offset by rises
in energy, transport and services costs.
The only other significantly negative price factor was a decline of
4.5% in the capital expenditure price index, largely a result of a fall
in construction tender prices. Otherwise the economy has been looking
at static prices, with wages stagnant and prices of locally consumed
imported goods up by 4%. The merchandise export sector has been very
strong with overall merchandise trade up by 18% with prices overall
almost flat. Though the visible trade surplus has declined due to some
recovery in domestic demand, net service sector net exports have increased.
However terms of trade have fallen as export prices have been static
while import ones have increased. The buoyant external sector cannot
carry the whole economy to double digit growth in the face of weak domestic
demand and a sharp fall in private sector construction. Total employment
has risen by only 3.4% over the year and electricity consumption by
4%. Private consumption overall is up 5.6% and though capital spending
jumped 13% in the quarter this may be a flash in the pan given the peaking
of public sector spending and the still low level of private construction.
What we are looking at here, Sir Donald, is a respectable level of
recovery but roughly half the one you are claiming. In fact, judging
by his recent remarks to HK reporters in Singapore, Zhu Rongji may have
a better idea of what's really going on here than you do. Most people
in Hongkong have yet to feel much benefit from the recovery,. noted
Zhu. He apparently appreciates that zero pay rises when prices are only
falling in the minds of government statisticians is no reason for contentment
-- other than by molly-coddled civil servants with guaranteed jobs,
free dentistry, subsidised housing and inflation-proof (but un-deflatable)
With nearly 750,000 people in full time jobs earning under $7,000
a month - and some 375,000 under $5,000 - it is no wonder that even
the normally supportiveDemocratic Alliance (DAB) is getting impatient
with the self-satisfied myopia of the Hongkong bureaucratic elite, at
least judging from recent spirited remarks by Chan Yuen-han. The Financial
Secretary seems to be gearing up for a tight rein on spending. He has
just warned of a HK$5 bn shortfall this year because of lower than expected
receipts from sale of MTRC shares - though this had earlier been claimed
to be a great success.
It is hard to know what the make of these remarks. A year ago Tsang
was warning of the need to broaden the tax base - which he himself had
drastically narrowed - which led to a widespread assumption of more
indirect taxes. But in the event nothing happened on the tax front and
Tsang ended up with a surplus not a $36 bn deficit originally forecast.
Is he now suggesting that the deficit will be higher just because of
the MTRC? Are his other estimates roughly right? Or will there be spending
shortfalls? Who knows? Either he should give a proper account, or keep
his mouth shut till the budget.
What is amateurish is not that the original Budget estimates, drafted
15 months before the end of the year in question, are often far out.
That is understandable. The problem is that those estimates made or
implied just a few weeks before the end of the financial year are also
so wide of the mark. His estimate for last year given just three weeks
before the end of the financial year proved wrong by HK$10 bn. Was this
incompetence or deliberate misleading of the public? There is scant
sense of public accountability. No wonder we have Cyberport, Disney
and now proposed soft sales of 3-G phone and digital TV licences by
a government which claims to be hard up for revenue.
But I suppose we all, journalists included, get confused by lists
and statistics. On Wednesday this paper carried a report and table about
comparative maths and science scores for 8th grade students in 38 countries.
The report listed Singapore top in both categories, with Hongkong fourth
in maths and 13th in science. Chinese Taipei (aka Taiwan) was not mentioned.
In the copy of the same report I downloaded from the internet, the Taiwanese
were first in science and third in maths, and Hongkong lower by one
place in maths and two in science. Such are the mysteries of statistics.
or something. ends The world is awash with issues of the constitution,
that word which sounds grave and imposing but in reality is simply the
place where law and politics meet.
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