A long-standing measure of economic activity in any country is the
Gross Domestic Product (GDP), which by definition is the total monetary value
of goods and services produced with in the country over a period- mostly a year.
It is often measured by the total sum of expenditure by key economic agents
(firms, households/individuals and government) and net receipts from abroad
(exports minus imports). However, it can also be measured by two other methods:
by adding up all the value added in a given year or by adding up all the money earned
(Income) each year. Theoretically all the three methods: expenditure, value
added and income should be equal. Governments use a combination of the three
methods and rely on the GDP figure to shape their economic policies including
the budget policies. Uganda uses all the three methods.
In the last couple of years, some African countries have rebased
their GDP figure thrusting them into middle-income status. GDP rebasing is the changing from old base year price
structure to a recent base year in compiling composition of GDP. It requires the national statistical offices to carry out
a survey of businesses in different sectors and allocate weights to each sector
based on the importance to the economy in the base year. Infact, most developed countries rebase their GDP
and sector weights every five years in order to reflect the current structure
of the economy in terms of consumption and production patterns.
In 2010, Ghana revalued its economy from
1993 base to 2006, increasing its overall GDP by over 60%. In April this year, Nigeria’s GDP rebased its
GDP from 1990 base year to 2010 base year, increasing its GDP by 89% to $ 510 billion suddenly becoming Africa’s largest
economy surpassing South Africa. Kenya in
September this year revalued its base year from 2002 to 2009, which increased
its GDP by 25 per cent to
$53.4 billion in 2013. Tanzania is also expected to rebase its economy from
2001 base year to 2007 and that should provide higher estimates than its
current GDP.
Uganda uses a base year of 2002 and since
then the structure of the economy has vividly and substantially changed. The
discovery of oil in 2006 is already changing the economic landscape, public
investments have drastically increased since 2008, mobile money has since been
introduced and grown exponentially, more banks and telecommunication players
have entered the market, and there has been a heightened increase of foreign
direct investments mainly to extractives, manufacturing and services sector.
Supermarkets have replaced the omnipresent informal shops in urban areas, and
the real estate has grown rapidly underpinned by the rapid growth in private
sector. On the overall, over the last decade, Agriculture sector dominance in
GDP composition has since dwindled over, while services and industry sector
have picked up. As such, there is need to revalue the GDP base year to capture
the economic developments in the national accounts.
As of end June 2014, Uganda’s nominal GDP
stood at $ 24.5 billion. By safely assuming that Uganda’s GDP would change by
same rate (25%) as Kenya, the figure would increase to $ 30 billion implying a
GDP per capita of $ 860 for the estimated 35 million Ugandans. This should
still be short of the Middle-income threshold of $ 1000, which implies Uganda
would still qualify for the concessionary loans. The higher GDP would also
heighten investors’ expectations, at the plus of attracting more investments:
both domestic and foreign
The rebasing will have implications on
the other metrics that are often referenced to GDP. For example with in the
EAC, Uganda has committed to the performance
criteria which requires a fiscal
deficit, including grants as a percentage of GDP of 3%, present value of public
debt as a percent of GDP of an utmost 50% as well as the revenue to GDP ratio
of about 24%. Rebasing would mean a
reduction in these ratios. For example, the already low revenue to GDP of 13%
would reduce further but at same time, the lower debt to GDP ratio would mean
more room for debt.
Lessons from other countries show that data matters more than
methods in the revision exercise. Complete and meaningful revisions can take
place only when data availability is improved. Uganda has a good foundation in
the recently concluded Census and other household surveys. It is also important,
it is done in an open and transparent manner, to minimise the risk of
politicians hijacking the process for election purposes given that 2016 is in
sight. Rebasing would also provide more accurate information to guide the next
phase of GDP. Uganda we can- For God and my country.
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