Zoellick plays down GDP errors
World Bank president Robert Zoellick admitted yesterday that the World Bank had consistently exaggerated the size of the mainland economy but said the error should have no policy repercussions.
Responding to a report released by the World Bank on Monday which said that the size of both China's and India's economies in 2005 had been overestimated by as much as 40 per cent, Mr Zoellick said poor statistics on the price of goods and services were to blame.
'You should see this as an evolving process in improving the statistical base in China and other economies,' he said.
A 40 per cent drop in the size of mainland's economy, as measured by purchasing-power parity, would see total gross domestic product shrink from US$10 trillion to US$6 trillion. Although the mainland still ranks as the world's second-largest economy, the United States appears comparatively much stronger.
Measured at market exchange rates, the US economy was worth US$13.2 trillion last year, nearly five times the mainland's US$2.7 trillion.
The new data compiled for the World Bank by the International Comparison Programme, which gathered prices for more than 800 goods and services, provides updated estimates of internationally comparable price levels across 146 countries.
Purchasing-power parity (PPP), which the World Bank and other international bodies use to give a fairer comparison of countries' relative economic strengths, makes allowances for the different prices of services and goods across countries without reference to market exchange rates.
Mr Zoellick said that previous estimates of the mainland's GDP in PPP terms had been extrapolated from price data collected by 'very rough surveys' in the 1980s, which had made goods and services seem cheaper than they actually were.
However, he warned that new data was still probably inaccurate because it included data from price surveys only in urban areas and failed to capture lower rural prices.
Telling reporters that it was too early to say what significance the revised figures would serve as a guide to the levels of poverty and development, Mr Zoellick pointed out that the relative price of a basket of goods was a better indicator of poverty levels than calculations made using GDP because the poor spend a high- er proportion of their income on food.
The World Bank needed to work with the mainland government to strengthen its statistical base and it would be wrong to 'draw any particular policy conclusions' from the report, he said.
According to the report's findings, 12 economies accounted for more than 66 per cent of the world's output in 2005.
The five largest developing economies - China, India, Russia, Brazil and Mexico - account for more than 20 per cent of global production.