Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Goskomstat Rewrites Economic History

The government has quietly rewritten history, burying a statement several pages deep into one of its official web sites that says the economy recovered from the 1998 financial crisis even faster than previously reported.

Economists were confounded Monday by the news that the State Statistics Committee, or Goskomstat, the government's official numbers cruncher, had posted on its site (www.gks.ru) an announcement that the nation's gross domestic product grew not by 3.5 percent in 1999 and 8.3 percent in 2000 -- figures that have been used by officials, institutions and economists the world over -- but by 5.4 percent and 9 percent, respectively.

It is not clear when the announcement was posted, and committee officials declined to answer faxed questions from The Moscow Times on Monday. But news agencies quoted deputy chairman Alexander Surinov as saying that the new figures were due to a reweighting of various industries and a recalculation of the impact of small- and medium-sized enterprises on the economy.

"We included new estimates on industry and made a new count of small businesses, which also influenced the GDP revisions," Surinov said. He did not elaborate, however, save to say that further changes to the key official figures would be made once information "on budget execution and some other data are approved and received."

Economists were perplexed both by the statistics committee's revisions and Surinov's vague explanation for them. The 54 percent increase in economic growth in 1999 is of particular importance, since the government last year decided to change its base year for such calculations from 1995 to 1999.

A new GDP number for the new base year effectively alters the whole economic perspective in terms of trends, said Taras Kabushko, an economist with the Organization for Economic Cooperation and Development.

The World Bank's chief economist for Russia, Christof R?hl, said that he couldn't think of a country that has ever made major revisions to official GDP data this long after the fact. "Of course, in many countries minor revisions have taken place, but definitely not three years later and not to such a large extent," he said, adding that the State Statistics Committee should say exactly why the revisions took place.

But while committee officials have been known to fiddle with numbers in the past -- former chairman Yury Yurkov and other top officials were arrested in June 1998 for allegedly manipulating companies' economic data to reduce their tax liabilities and for selling classified corporate information -- economists said they doubt that this is the case now.

"It is unlikely that Goskomstat is playing any kind of political game, said Oleg Vyugin, chief economist at Troika Dialog.

"If the results of last year or some current figures were to be changed then, yes," said Vyugin, a former deputy prime minister who was Russia's chief negotiator with the International Monetary Fund in 1998.

Vyugin said the revisions were likely triggered by the change of base years, which was done in response to the structural changes in various industries that followed the August 1998 financial meltdown.

Since that decision was taken last June, the committee has been revising official figures -- first for industrial growth and then for aggregate indexes for the whole economy.

Vyugin said that while economic statistics in general are full of approximations, in Russia they are even more so. Basic factors such as production and consumption, for example, usually do not match, leaving considerable room for estimations, he said.

Part of the problem stems from the size of the so-called gray economy, which operates largely out of the government's view.

Economists estimate that the gray economy is roughly one-fifth the size of the real economy.

Compounding the difficulties of measuring the economy, said Vyugin, is Russia's tendency to change too radically and too quickly to assemble accurate data.

"I think that Goskomstat undervalued Russia's economic growth in the past and continues to do so because there is a gray sector of the economy, but nobody knows where is it heading."

Vyugin also questioned the government's claim of higher tax collections, which also affect final GDP figures. Just because tax collections are up doesn't mean that "suddenly everyone started paying their taxes," he said, adding that there is still a significant number of companies still operating in the gray economy that isn't reflected in statistics.

"In the insurance industry, for example, half of all premiums are salary schemes" that allow companies and employees to avoid paying taxes -- and avoid being counted by the committee, he said.

In one of the more popular salary schemes, companies buy life insurance policies for their employees, who receive monthly annuities from the insurance company in lieu of salaries. Life insurance annuities are tax exempt as long as the term of the policy is for more than five years. Thus, the company avoids paying social taxes, and employees earn tax-free income.

Yet the State Statistics Committee remains the most reliable source, even if its data is not perfect, but "it would be nice if it explains the reason for the revisions -- if not for the average person, then at least for professionals," Vyugin said.

The State Statistics Committee has not changed its preliminary estimate for 2001 GDP growth, which remains at 5 percent.