Data Economics: Russia's GDP will be radically recalculated
Statistical agencies around the world, including Russia, have been given a new task — to recalculate GDP and other macroeconomic indicators in accordance with new methods. In particular, the changes will affect the assessment of the depletion of natural resources and the production of data. Since in both cases we are talking about a very significant part of the national economy (units of percent), the recalculation can lead to a large difference between the economic indicators of different countries. The situation is complicated by the fact that it is a very difficult task to carry out such an assessment, which can only be performed by indirect methods. How much Russia's GDP figures and their ratio to other countries of the world will change is in the Izvestia article.
Why change national accounts
The concept of national accounts has existed for a century and a half (the most famous of them, GDP, was, however, introduced only in the 1930s). However, almost half a century ago, only economists and government managers knew about them. In the current information age, these indicators have "disappeared into the world," becoming the subject of public debate and a political factor. Although the results of the calculations themselves do not change anything (it is neither hot nor cold to revise the figures for the material well-being of people or companies), they can significantly influence the mood of society or political decision-making.
The methodology of calculating GDP, and with it other national accounts, has changed repeatedly over the past 100 years. Hedonistic indexes, rental payments, and the transfer of research and development costs to investments are just the most well-known changes, the visible part of the iceberg. In some adjustments, from the point of view of the applied value, there seems to be no point. Take, for example, the attributed rent, or the imputed income for the rental of housing for the owners of the living space. In fact, this means that virtual money is taken into account in GDP, which the owner of the apartment and house saves by not having to rent a house. At first glance, it looks like a complete absurdity and a postscript. However, from the point of view of cross-country comparisons, this technique is more than justified. Not all countries have a majority of people living in their homes, and the gap can be dozens of percentage points. For example, in Germany, more than 50% of the population lives in rented houses and apartments, while in Russia only 15-20%. If we do not take into account the estimated rent, Germany's GDP will be greatly overestimated in comparison with Russia's, although this will not tell us anything about the development of the economy or the standard of living in both countries.
According to the recommendations of the United Nations, from 2025, the gradual transition of statistical authorities in most countries of the world to the next new standards for calculating macroeconomic indicators will begin. The previous statistical manual of the System of National Accounts (SNA) was released in 2008. It took most countries four to seven years to implement its provisions into national methodologies.
Depleted resources will be deducted from income
As noted in a study by the Analytical Credit Rating Agency (ACRA), received by Izvestia, the most important changes to the SNA this time will affect several parameters.:
— depletion of non-renewable natural resources will be counted as production costs;
— reflecting data production as an investment in fixed assets;
— the activities of central banks will be considered non-market.
It should be noted that the new method of accounting for the depletion of natural resources will not directly affect the value of gross domestic product (GDP), but will lead to a decrease in net domestic product (NVP) by up to 20% of GDP for countries with high production volumes. The logic of PMCs is to display the full "price" that the economy pays in order to maintain current production volumes. With the introduction of the new methodology, the PMT will become more informative. For Russia, the difference between GDP and PPP will increase by about 6 percentage points, to 18-21%.
The logic of these changes is that, according to previous calculations, the extraction of non-renewable resources increased GDP and other indicators, but did not clearly record the losses of national wealth that are associated with this. For example, the steady growth of Mongolia's economy in 2011-2018 by an average of 6.5% per year was largely due to the boom in exports of copper and coal (mainly to China). The economy received income at the cost of the growing depletion of natural resources, and the income was not sufficiently saved and invested. GDP grew, but there was no real improvement in the economic situation, as national wealth declined.
According to ACRA estimates, Russia's large depletion of natural resources accounts for a significant share of GDP — about 6.3% on average for 2012-2021. At the top of the list are purely raw-material countries, where this figure can reach up to 46.3%, such as in East Timor. At the bottom are small island states and parts of Europe, where it is zero. In 2021, according to the agency's analysis, the PMF would have decreased by 12.3 trillion rubles compared to the previous methodology.
Confusion with estimates
The situation is more interesting with estimating the value of data that was not "produced" for sale. This is a "necessary but complex innovation," as a result of which GDP will be revised up by up to 3%, depending on the country. The logic of the changes is that the data collected, created and processed by companies or the government can work for the economy not only at the time of creation, but also for a long time after that. This makes them similar to investments in fixed assets, and the importance of data in the current economy is constantly growing. Presumably, this will primarily affect the financial sector, public administration and retail trade.
The potential impact of the introduction of changes in methodology on modern Russian GDP is its revision by about 2% upwards with the prospect of multiple growth over the next decade. According to this indicator, Russia is approximately equal to many developed countries, for example, Australia or Canada, and, presumably, may surpass Germany or Sweden (however, all estimates are still very approximate).
The problem is that the value of the data collected and processed for its own use is unknown. It will be calculated on the basis of the corresponding labor costs. But such an assessment will require rather complex studies of the very essence of the work, rather than its formal characteristics. At the moment, very few such market indicators are being collected. Statistical agencies will have to evaluate which professions in each industry involve data collection and processing. It is even more difficult to determine how much of the working time in each profession is spent on data-related tasks, that is, to examine the structure of individual workers' working hours.
Given the complexity of these calculations and the varying degrees of readiness of relevant departments in different countries to address these challenges, any cross-country comparisons in the coming years will need to be taken with a fair degree of skepticism. Differences from reality may amount to 1-2% of GDP or even more. We are talking about tens of billions of dollars for countries like Russia.
"The recalculation will affect not only GDP, but also national wealth, that is, the value of the stock of assets owned by residents," said Dmitry Kulikov, senior director of ACRA. — Since these data have been "living" and working for more than one year, their accumulated value will amount to significantly more than 2% of GDP. This is an even more complicated calculation, but the order of value of the accumulated data can be estimated at 10%.
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