* Macroeconomic figures patchy, often unreliable across
region
* Causes include secretive govts and firms, undeveloped tax
systems
* Some efforts made to improve data in last few years
* But boom means officials feel little pressure to address
problem
* Complicates attempts to reform economies, develop capital
markets
By Martin Dokoupil
DUBAI, Feb 24 (Reuters) – Saudi Arabia’s economy chugged
along at modest annual growth rates of around 2.5 percent in the
first three quarters of 2013. Then in the fourth quarter it
soared, with gross domestic product jumping 10 percent from a
year earlier.
That is the picture delivered by data from the government’s
statistics office. But it is not a picture which would be
recognised by many Saudi companies, which saw their profits
crimped by a crackdown on illegal workers late last year, and it
is not in line with private surveys of business activity.
So many economists have concluded that the official data is
faulty in some way, and that actual Saudi GDP in the fourth
quarter may be billions of dollars lower than the statistics
office suggests. But it is not clear when, or whether, the
mystery will be solved.
As the wealthy Gulf Arab oil exporters boom and open wider
to foreign investment, investors are operating in something of a
fog: they must base their judgements on patchy and erratic
macroeconomic data. In many cases the data is less reliable than
numbers provided by emerging economies in Asia and Africa.
In the Gulf, preliminary figures for economic indicators can
be off the mark but revisions may occur only many months later,
if at all. Release times are irregular; Bahrain has not
announced its monthly money supply data since November.
Some data series have been suspended for a few months before
resuming. Other data just does not exist. Kuwait, for example,
does not regularly publish GDP growth figures, making it almost
unique among the world’s rich countries.
Because of the region’s oil wealth, economies have so far
grown without many visible ill effects. But the costs of having
such poor data may increase as the Gulf states develop their
financial markets and diversify their economies in an effort to
become less vulnerable to the next big drop in oil prices.
“The regional central banks have to understand that
timeliness and consistency, and scientific production of data,
are a necessity if they want to show they are open for
investment and business,” said John Sfakianakis, chief
investment strategist at MASIC, a Riyadh-based investment firm.
A lack of reliable figures for government spending can hurt
investment because many firms base their decisions on the level
of that spending, he added. Abu Dhabi, which accounts for some
70 percent of state spending in the United Arab Emirates, does
not publish its annual budget plans in a comprehensive manner.
REASONS
The Gulf countries have enough money to create agencies
compiling accurate, regular statistics if they wish. So the
reasons for the data problem appear complex.
The biggest reason may be simply that governments see no
strong need for data. Economies are still driven by oil
revenues, which depend mainly on external rather than domestic
demand. Monetary policy is basic, with central banks rarely
adjusting interest rates or liquidity supplies.
Since authorities are not continually fine-tuning policies
in response to economic trends, they do not view collecting
timely, detailed data as a priority.
Also, because of their reliance on oil revenues, Gulf
governments generally do not collect individual income or
value-added taxes. Tax systems are a key source of raw numbers
for economic statistics in other countries.
Many Gulf companies have secretive cultures and are
reluctant to disclose any information on their business, even to
governments – a major headache for state statisticians.
An additional factor may be the secretive nature of the Gulf
governments themselves, which tend not to debate sensitive
issues in public. In some cases, they may be accumulating data
but choosing not to reveal it, or not bothering to do so.
“A lot of data is collected, so it is available for policy
makers, but is not published,” said Paul Gamble, director in the
sovereign group at credit rating agency Fitch Ratings.
Authorities are making efforts to strengthen their data
services; the emirate of Abu Dhabi, for example, has launched a
comprehensive public statistics website over the last few years.
Gamble said Gulf data had improved enough over the past decade
“to give a broad guide to economic performance”.
But policy makers and businessmen still face puzzles such as
Saudi Arabia’s fourth-quarter GDP. The government’s statistics
office announced that the country’s GDP grew 3.8 percent in
2013, but did not give a number for the fourth quarter.
Calculations by Reuters and private economists show the 2013
figure can only be reconciled with the data for the first three
quarters if fourth-quarter growth is a sky-high 10 percent.
Over the past year, Saudi Arabia’s official figure for its
2012 GDP growth was put at 6.8 percent, then revised down to 5.1
percent, then raised again to 5.8 percent. The statistics office
did not reply to Reuters questions about the numbers.
“Data has improved but of course there is a credibility gap
in terms of data being convincing and believable,” Sfakianakis
said. “Too often we see extreme revisions in macro indicators.
They are not properly communicated. If you change GDP by 2
percentage points…they highlight major statistical lapses in
your survey.”
Dodgy data also leads to mysteries such as the population of
the UAE. According to the UAE’s National Bureau of Statistics,
the population was last officially estimated at 8.3 million in
2010, but adding together individual estimates for the UAE’s
seven emirates produces a total of only about 5.6 million.
Rashid al-Suwaidi, director-general of the NBS, told Reuters
that “technicalities” were probably behind the difference but
that a full explanation would need a closer look.
“Once they do a population census, this issue will be
resolved. In the meantime we have to live with these two
different estimates,” said Harald Finger, the International
Monetary Fund’s mission chief for the UAE.
It is not clear when the next census will be conducted. If
the UAE ends up concluding that the smaller number is correct,
that could be a disappointment to investors for whom the size of
the country’s market is a key factor.
CHALLENGES
In the absence of reliable official data, many businessmen
and analysts use private surveys and estimates of certain
sectors to gauge economic trends – though the private surveys
face many of the same obstacles as government statisticians.
German car maker Opel estimates the region’s car market is
growing about 10-15 percent annually. If that is the case,
official data showing Gulf economies growing at rates of around
3-5 percent may be understating reality.
While the shortage of reliable data in the Gulf may matter
little when economies are booming, it can become dangerous when
there is a major downturn. It can slow authorities’ realisation
that trouble is brewing, and add to investors’ jitters.
Dubai found this in 2009 when some of its state-linked
companies ran into trouble, forcing multi-billion dollar debt
restructurings. A lack of data about Dubai’s economy and state
finances caused many investors to assume the worst, triggering a
panic that hit emerging markets around the world.
Since then, Dubai has begun revealing more information,
though not as much as developed economies. It has still not
sought a rating from credit rating agencies, which would require
a higher level of disclosure.
Many Gulf states are considering reforms of their public
finances, and ways to develop their capital markets and foster
private-sector businesses, to ensure their economies and
political stability are not held hostage to oil prices.
Poor data hinders these efforts. For example, Gulf states
have been considering the introduction of a sales tax to widen
their revenue bases; the tax would have to be introduced across
all six Gulf Cooperation Council economies to prevent consumer
spending from migrating to lower-tax countries. But without
clear data on consumption, population and growth, it is hard for
authorities to estimate the impact and benefits of the tax.
In the long run, GCC countries hope to integrate their
economies and financial markets further, perhaps eventually
forming a single currency area. But as the euro zone has found,
a single currency requires coordination of economic policies,
and that would be difficult without comparable data.
“They cannot have a monetary union without having harmonised
data. We are not yet there,” Sfakianakis said. “If there is
political will everything will fall into place. Political will
does miracles in the region.”
