Measuring Argentina's GDP: Myths And Facts

Ariel Coremberg - January 2014

Speed Read

Since 2007, official economic statistics in Argentina, particularly on consumer inflation and
GDP, have been subject to political manipulation.

This paper reproduces Argentine national income from 2007 using standard methods and
original sector data and finds that declared GDP is 12.7% higher in 1993 prices due to political
intervention.

The paper finds that the distortion is mainly due to changes in accounting methodology
across industries and not to changes in inflation estimates.

The reproduced GDP data dispels the myth that Argentina has been the
fastest growing South American economy in recent years.

The Problems with Argentinas Official Economic Data

During the last two decades, Argentina has experienced economic instability
which has had a strong impact on the sustainability of the countrys long-run
growth. In addition, there have also been a number of government actions that
cast doubt on the veracity of official economic statistics. In 2007, the
administration decided to suppress reported inflation by intervening in the
calculation of the official Consumer Price Inflation Index (CPI) estimated by the
National Statistics Institute (INDEC), an interference that still continues. Since
2007 several academic and private analysts have estimated that the actual CPI
has been considerably higher than the one reported by the official series. In
consequence there have been accumulating gaps between the official
estimation of inflation and alternative ones and this also distorts the
measurement of other important economic indicators, such as the poverty rate
and the distribution of income. At present, for example, Argentina has an official
poverty rate at a lower level than Sweden.
Political intervention in the production of statistics began in January 2007 with the CPI, and a
few months later, the wholesale price index (WPI) was also modified, as well as also the official
Household and Employment, Manufacturing Survey. This has had a profound influence on many
other interlinked Argentine economic indicators. One of the reasons for the political intervention
was to reduce the amount of the public debt indexed by the CPI to increase public savings.
Paradoxically, at the same time, the positive upwards bias on GDP generated some substantial
extra payments of public debt linked to economic growth.

This political manipulation of statistics has created an incentive to undertake alternative

unofficial estimates of GDP in order to analyze the growth profile, productivity and
competitiveness of Argentina more accurately The author has carried this out using the
ARKLEMS database, resulting from a project organized by a team of Argentinean academics
and researchers from the University of Buenos Aires. The project measures and analyses the
sources of economic growth, productivity and competitiveness of the Argentinean economy at
the macro and at the industry level.
The purpose of this paper is to present an indicator of economic activity that reproduces the
GDP growth of Argentina from 1993 to 2012 at a very detailed industry level, following the same
traditional sources of information and methodology used by the Argentine National Accounts
System during the twenty five years previous to the INDEC intervention of 2007. By showing
this, we will also be able to measure the distortions induced by the political intervention.
It is necessary to distinguish legitimate measurement errors which can bias output and
productivity measurement from manipulations aimed at showing political results. The latter
problems have been well documented for countries such as Greece where Sturgess (2010), for
example, reports distortions related to the measurement of public debt and public finance
indicators, in order to show a public deficit figure below the 3% of GDP required to enter the
Euro zone.
Argentinean CPI distortions have been reported in Cavallo (2012) , but many academics share
the view that not only the CPI but also real GDP growth has been significantly lower in Argentina
than what official publications report. Up to now these differences have not been systematically
estimated, verified and reported.

Reproducing GDP: The Methodology

At present the GDP of Argentina is estimated following an old approach: using a
volume index at 1993 prices, while national accounts in developed countries,
and also in several Latin American countries, have progressively moved to the
so-called chain indices. The National Accounts of Argentina also lag behind in
terms of updating the base year (it uses an old set of relative prices and
weights), but the main problem rests in the credibility of the data.
Most components of Argentine GDP are estimated using volume index
indicators and not by deflating the value of production or value added at current
prices. This methodology was adopted more than two decades ago, and it is
applied to the main basic series that constitute GDP in Argentina. Those volume
index indicators do not belong to INDEC, but come mainly from other more
representative public and private surveys carried out by different institutions.

Checking up the consistency of actual GDP estimations is therefore a possible

but difficult task, which demands time and also a detailed knowledge of the data
sources and the methodology used for estimating the GDP figures.
In order to do that checking, we reproduced the GDP of Argentina following the traditional
National Accounts methodology. We compiled published and public series that made up every
industry value added volume index of GDP at 4-5 digit of the ISIC classification from 1993 up to
the present. The main result of this procedure is a series that replicates almost exactly the
official Argentine GDP growth from 1993 to 2007. After that year, however, an important gap
appears. This gap increases over time as is shown in Figure 1.
Official GDP shows a positive gap of 12.3% in 2012 with respect to our ARKLEMS reproduced
GDP. During the period of political intervention in the production of official statistics, reproduced
Argentina GDP grew by 15.9% between 2007 and 2012 (3% annually), a fall in the rate of
growth of GDP with respect to the earlier period 2002-2007 of 47% (8.1% annual rate).
However, after intervention official figures show a higher, almost doubled rate of GDP growth
between the years 2007-2012: 30% (5.3% annual rate).

Figure 1: Argentina GDP 1993-2012, Volume index 1993=100.

Stylized Facts and Myths

Political interference in the production of statistics has created a number of
myths about Argentinas growth, which can be dispelled using our GDP
estimations. Three myths are evaluated below which we call the methodological
myth, Argentinas resurrection myth and the myth that Argentina is a Latin
American growth champion.
The Methodology Myth: Official Argentine GDP data has a positive bias upwards because official INDEC
estimation deflates value added at current prices with a manipulated consumer price index.

In reality the positive biases in the present official GDP are not due to a consistent application of
a new methodology, but to the withdrawal of the traditional national accounts methodology and
the application of discretionary non-reported criteria. The revision reports carried out by our
study through traditional methodology and data sources, shows that only financial
intermediation (5% of GDP) was affected by using inaccurate deflators . Furthermore, analyzing
the contribution of every industrys value added gap, financial intermediation explains only 27%
of the total GDP gap between official figures and reproduced data. The other main sectors
explaining the gap are trade (28%) and manufacturing (20%) while other services (9%), real

estate (8.2%) and hotels

and restaurants (4.5%) are also important. The rest of

services and goods production explain a minor share, compensated by minor
negative gaps from public administration and agriculture.
To summarize, our GDP estimations show that the resulting gap does not depend on official CPI
index manipulation instead, 70% of the total gap is due to discretionary intervention on
individual industries by changing the original national accounts methodology.
The Resurrection Myth: Recent Argentina growth episode was the highest growth acceleration of for
many decades.

It is important to analyse the GDP cycle to study whether an economy is recovering from a
recession or a previous crisis, and whether it is starting a process of growth acceleration. It is
important to assess whether an economy is growing in the long run, beyond a cyclical recovery
(Hausmann et.al. 2005). One of the stylized facts of the commodity price boom that took place
between 2002 and 2011 is that the economic growth of Latin America and Argentina occurred
after a deep economic depression during 1998-2001. But there are a number of questions that
need to be answered? How much of the economic growth was really due to the boom and how
much was due to a recovery effect? By how much did GDP accelerate, in comparison to the
previous positive growth phase that occurred during the so-called Washington Consensus
period in the 1990s? The answers to those questions depend on the consistency of the GDP
series used.
The periods of analysis have been chosen in order to compare the actual boom that which took
place during the reforms of 1990-1998 which lasted until the negative shock of 1998 followed by
the depression of 1998-2002 with later periods. Moreover, comparing that crisis phase 19982002 to 2002-2012 allows an analysis of the impact of the present boom of commodity prices on
the recovery after the crisis. We also report data for the periods 2002-2007 and for 2007-2012,
taking into account that 2007 is not technically a cyclical peak, but rather is the year when the
political intervention of official statistics began.
The Table below shows the GDP performance in the periods previously defined according to the
official INDEC statistics and to our alternative GDP ARKLEMS reproducible estimations.

Source: ARKLEMS. GDP growth at producer prices.

The growth episode from 2002 to 2012 measured by reproducible GDP is

similar to the previous positive phase in Argentine history (1990-1998).
However, official figures show that the recent growth episode was much
stronger than the previous one. The GDP estimates show Chinese style
growth rates, at approximately 8% annual growth, only during the period 2002-

2007 (47.6% cumulative rate). But after 2007, Argentina suffered an important
GDP slowdown: 15.9% of accumulated growth (3.0% annual rate). The official
GDP performance, however, shows almost double the rate of growth at 29.4%
(5.3% annual rate) compared with the reproducible GDP.
As has been demonstrated in Coremberg (2011,2012), an analysis of Argentinas growth profile
by source showed an unsustainable growth extensively based on factor utilization which was
accompanied by a Total Factor Productivity slowdown during the recent growth episode. The
reason for the slow-down is not only based on unsustainable growth and the inefficiency of
productive factors, but mainly on lower growth performance that it is not recognize in official
statistics. For example, Argentine GDP grew between peaks only by 2.5%, according to
ARKLEMS estimation (instead of the official 3.4%).
The Growth Championship Myth: Argentina is the Latin American country which has had the highest
growth acceleration in the region during the last decade.

According to official figures, Argentina was the growth champion in the whole region over the
period 2002-12 with an impressive cumulative growth of 99%, more than double the regions
average. However, if we use our ARKLEMS GDP estimation, instead, the growth performance
of Argentina is substantially lower (71%, or nearly 30 points less than the official figures) and the
country lies behind Peru and Uruguay in the rankings. This comparison is shown in Figure 2.

Figure 2: Latin America GDP Growth, 2002-2012 (compound rate, %).

Source: ARKLEMS and ECLAC.

Conclusion
This paper has made an exhaustive revision of the Argentina National Accounts'
methodology in order to reproduce GDP series since 1993 and check economic
growth after political interventions in the production of official statistics.
Our series reproduces Argentinas GDP growth closely from 1993 up to 2006. Since then, the
difference between the official series and ARKLEMS reproducible series accumulates a large
positive bias upwards due to intervention.
The divergence between our results and official figures is due to the withdrawal of the traditional
GDP measurement methodology in almost every sector of GDP. The paper shows that these
distortions are not based on deflating value added by industry at current prices levels with
manipulated price indices but mainly on discretionary intervention in every industry component

of the GDP, not only financial sector but also trade and manufacturing and the rest of services
and goods production sectors, with the objective to be to show a higher GDP growth.
The official series present a picture of GDP growing at higher rates during the recent recovery
period (2003-2012) than in the previous one (1990-1998), and they make Argentina lead the
GDP performance of the region. But our research demonstrated that ARKLEMS reproducible
GDP for recent growth episode had a similar performance to the previous positive cycle, 19901998. Technical analyses based on typical National Bureau for Economic Research (NBER)
cycle decomposition updated by Hausman et.al. (2005), shows that Argentina does not have a
sustainable growth acceleration.
The paper showed that Argentina growth was important during recent growth episode, but
contrary to official figures, the country was not the growth champion of the Latin America region.
Argentina has also one of the largest GDP volatilities in the whole region, showing a very slow
performance, lower (next to Mexico) than the region and Brazil, when the comparison is realized
between peaks of economic cycle (1998-2012).

References
Cavallo, Alberto (2012). Online vs Official Price Indexes: Measuring Argentinas
Inflation - Journal of Monetary Economics. December 2012
Coremberg, A. (2011): The Argentine Productivity Slowdown.The challenges after global
financial

collapse,

World

Economics

2011.

Vol.12,

n4.

http://www.world-economics-

journal.com/Contents/ArticleOverview.aspx?ID=481
Coremberg, A. (2012): Measuring Productivity in Land Rich Economies. The ARKLEMS+LAND
Project, WorldKLEMS 2nd Conference, Harvard University
Haussman R., Prichett L. and Rodrik D. (2005): Growth Accelerations, Journal of Economic
Growth, December 2005, Volume 10, Issue 4, pp 303-329
Sturgess, Brian (2010): Greek Economic Statistics: A Decade of Deceit. So how come the rating
agencies

missed

it

again?

World

Economics,

Vol.

11

No.

AprilJune

2010

Notes
1 The methodology is based on KLEMS framework (Capital, Labor, Energy, Material and Service Inputs) in coordination with the
WORLDKLEMS Project lead by Pr. Dale Jorgenson (Harvard University), Marcel Timmer (Groningen University) and Bart Van
Ark

(Conference

Board

and

Groningen

University).

2 Another important and methodological consistent alternative estimation have been made by G. Bevaqua, former Director of
CPI

as

CPI

GB,

which

is

issue

by

email

distribution.

3 After 2007, many consultants and experts have been fined by the government; the Argentinean justice system has quashed
penalties

only

The

recently

International

after

more

Standard

than

four

Classification

years

of

of

trials

All

and

judicial

Economic

conflicts

Activities

5 In the case of restaurants and non-regular passenger transportation, the traditional methodology uses a demand function
approach (because there are no direct surveys on those industries), so index prices do not enter directly in the estimation
unless through the relative prices of those categories in the CPI. But this methodology was abandoned in 2003, before the the
intervention.