Chapter 6 Article

Article: Revised GDP figures show Czech economy in better light

"The upward revision places Czech public finances in a better light and gives the cash-strapped government leeway in fulfilling its target of reducing the fiscal deficit below four percent of GDP by 2006."

The Statistics Office of Czech Republic removed the original GDP figures for the years 2000-2002 and replaced them with a modified, "revised" version of the figures. This modification to the GDP was meant to act almost as a cover-up for the more accurate amounts that showed the Czech Republic’s poor financial position. The revised version of the GDP for the years 2000-2002 were 6%, 7%, and 8% higher than the original amount respectively. Although these adjustments did not affect the year to year GDP growth rates, they altered some very important values such as national debt and deficit that were taken into calculation as the basis of the GDP. This was done to buy time for reaching their financial goal for the year 2006, but the increase in GDP could raise some new problems. “The higher GDP, however, also implies that the Czech Republic will have to contribute more to European Union funds.” Increased contributions to the European Union funds could result in a slower rate of recovery from the deficit.

Relation to Chapter 6

In the chapter, it is mentioned that the measure of GDP isn’t completely accurate especially when it comes to measuring social welfare and even economical well being. When numbers and values of GDP can be revised to “show the economy in a better light”, it lessens the accountability of the numbers. In the article, for example, the values in Czech Republic’s GDP are overstated intentionally on top of all the other inaccuracies that the GDP figure might have. Even though the country is in great debt, GDP can be altered to give off a false impression. This means that GDP figures can often be misleading, shouldn’t be used as the only basis to measuring the well being of a country. Real GDP is a more dependable figure than GDP, but can also be revised to better portray a country’s financial position. It is disappointing to see that even an important statistic like the Gross Domestic Product can be hard to trust. One needs to take into account all the factors that go into a statistic to accurately utilize the figure.


Note*** commented on Colin Ng Ch. 5 & 6 blog