THE CONSEQUENCES OF THE "ERROR" MADE BY THE NATIONAL STATISTICS INSTITUTE: A lower GDP, a greater deficit and the top brass of the National Statistics Institute laid off

The downward revision of the GDP for the year 2011 will change the economic indicators, as well as lead to the replacement of the National Statistics Institute. A GDP of just 557 billion lei, compared to the initially reported 578 billion lei, will reduce the economic growth for the year 2011 to 2.2%, down from the initial number of 2.5%.

Also, the numbers forecasted by the National Forecast Commission (CNP) in the month of November, for the GDP values of 2012 and 2013 will be revised too. In the autumn forecast for the 2012-2016 period, the CNP estimated that the economy would grow by 0.7%, to 608.5 billion lei, in 2012, and 2%, respectively, to 648.7 billion lei, this year. If the Commission maintains its percentage estimates, the GDPs for 2012 and 2013 would just drop to 587 billion lei, and 625 billion lei, respectively. Based on these estimates, the Government intends to set the budget for this year. The president of the National Forecast Commission, Ion Ghizdeanu, said that the institution he leads has not yet completed the forecasts for 2012 and 2013, but he said that they will see important changes, following the final data announced by the National Statistics Institute (INS).

This year, a smaller GDP would lead to reduced budget revenues and expenditures. On Thursday, Prime Minister Victor Ponta has announced that the Government will need to cut off one billion lei out of the expenses stipulated for this year, in order to fall within the budgetary deficit. However, he did not specify whether the weight of revenues and expenses in the 2013 GDP will remain the same as last year, 32.4%, and 34.1%, respectively.

Another consequence of the downward revision of the GDP stems from the increase of the budget deficit. Thus, the deficit pertaining to 2011, of 23.8 billion lei, now represents 4.27% of the GDP, instead of 4.11%, according to the initial calculations. Also, if the budget deficit for 2012 is 13.6 billion lei, this represented 2.3% of the new GDP, of 587 billion lei, instead of 2.2%, as it was estimated based on the previous numbers. In the first eleven months of 2012, the budget deficit was 1.77% of the GDP.

It's not only macroeconomic indicators that would feel the effects of the revision of the figure concerning the evolution of the economy in 2011, but the people which helm the National Statistics Institute as well. Victor Ponta yesterday said that he has asked the secretary general of the Government to replace the managers of the National Statistics Institute for the "serious mistake" they have made. The Prime Minister said that he wants the National Statistics Institute to employ people that the Government can rely on when it announces data about the GDP, or about "the number of citizens in the country".

The representatives of the National Statistics Institute (INS) have explained that the differences between the provisional and the final data concerning the GDP for 2012 do not represent a mistake, but rather a reality reflected by the final data.

The definitive information about the annual GDP has been adjusted every time, but between 2003 and 2010, those revisions have always been to the upside, and of a smaller scale.

The downward revision of the GDP for 2011, is making it hard for the Government to achieve this year's budget, as well as possibly affecting the manner in which investors perceive Romania. At the same time, however, they are giving the Government the excuse to reduce their budget expenditure, as well as to replace the management of the National Statistics Institute. Vergil Voineagu was appointed in 2005, during the term of Călin Popescu-Tăriceanu as prime minister.

This is not the first attempt of Victor Ponta to replace the management of the National Statistics Institute. Last year, the prime-minister replaced Cosmin Sabo and Cristian Stănică, vice-presidents of the institution, with Elena Iagar and Florin Ciuariu. The prime-minister had initially signed the decisions to dismiss Cristian Stănică and Gered Beatrix, the third vice-president of the INS, only to then reinstate the latter, dismissing Cosmin Sabo instead.