A major revision of Rosstat’s GDP data has greatly worried economists

The past 2023 was particularly significant in terms of the quality of data on the structure and dynamics of the Russian economy and the decisions on monetary policy that were made on its basis – regular strong revisions of statistics added uncertainty and unpredictability to it. In 2024, the problem will not go away, but it will probably appear with renewed vigor.

At the end of December 2023, Rosstat increased the estimate of Russian GDP growth in 2021 by 0.3 percentage points (to 5.9%), lowering the estimate of the decline in 2022 by almost half – to 1.2% from 2.1%. Significant discrepancies in Rosstat estimates are traditional and occur from year to year. “This is normal practice, since data from business and the public sector continues to be received by the department for two years after the reporting period,” notes Lev Denisov, head of the department of macroeconomic analysis and forecasting of the Ministry of Economy. But independent Russian macroeconomists recognize such revisions as a problem. Thus, analysts of the MMI Telegram channel, noting that “high-quality macrostatistics are the key to correct management decisions (budget and monetary policy),” call Rosstat a source of regulatory misconceptions. “Since this happens year after year, these are exclusively shortcomings of the methodology. And something needs to be done about this. It is also necessary to ensure consistency between quarterly and annual series. This is also an annual problem; from December to April, the quarterly series do not correspond to the annual ones.”

The reasons for the recalculation of Rosstat data on value added back in 2021 were specially studied by economists from the Higher School of Economics and the Bank of Russia. The first see two problems: this is “the lack of user-accessible archives of all available official documents and statistical databases – and the lack of clear… comments and explanations, both on the methods for calculating various indicators and on the procedure for providing data on them.” The HSE also noted that “there is a positive asymmetry in revaluations.” The Central Bank acknowledged that recalculations are an additional challenge when making decisions on monetary policy: “Uncertainty… can be significant, especially during periods of strong shocks,” but “a sharp shift in the first estimates can lead to incorrect calculations and conclusions for policy.”

As a result, 2023 seems to have turned out to be particularly unpredictable for both GDP and monetary policy: at the beginning of the year, the Central Bank consensus expected the economy to fall by 1.5%, and at the end – growth by 3.1%. The money supply increased at the fastest pace since 2013, and the regulator moved to rapidly increase the key rate in the second half of the year, but inflation at the end of the year remained well above the target. MMI draws attention to the “people’s budget” published at the end of December 2023 by the Ministry of Finance: “GDP growth in 2023 is indicated at 3.5% (this is the figure for the desired economic growth that was repeatedly pointed out in the Kremlin.— “Kommersant”), although other parameters depending on this figure are not specified. It seems that indeed 3.5% is already a given figure, which can only be revised upward.”

At the same time, the data revised by Rosstat allows officials of the Ministry of Economy to make not only quantitative, but also qualitative assessments of what is happening in the economy. “New data from Rosstat suggests that the potential growth rate is higher than a number of experts believe. The current growth rates do not indicate overheating of the economy, but confident sustainable development,” Lev Denisov is convinced. According to his forecast, the current estimate (3.5% “according to the Ministry of Finance”) may also be revised upward as early as February 2024.

Meanwhile, commenting on the decision to increase the key rate at the end of 2023 to 16%, the head of the Central Bank, Elvira Nabiullina, noted that the economy is still overheated (growth is higher than the potential 1.5–2.1%). Analyst consensus also expects the economy to cool in 2024 and inflation to decline (especially in the second half of the year). However, due to structural changes, the economy’s potential may have changed dramatically, shifting monetary and economic policy decisions into an area of ​​at least as much uncertainty as GDP estimates.

Artem Chugunov