Wednesday, March 24, 2010

Window on Eurasia: In Russian Statistics, One Must Not Believe, Moscow Analyst Says

Paul Goble

New York, March 24 – Rosstat, the Russian State Statistics Committee, has been playing so many games with the data it has released on that country’s economy, according to a Moscow analyst, that at the present time, one cannot say whether they bear any relation to reality in terms of the direction they ostensibly point to or the magnitude of the vector they supposedly show.
In an article in the current issue of “New Times,” Dmitry Krylov says that recent data offered by Rosstat on trends in the economy provide grounds “neither for pessimism nor for optimism” because the statistics agency has played with the data in such a way that “one simply should not believe Rosstat numbers” (
After not putting out its index of industrial production during the early months of the economic crisis, Rosstat at the start of this year started to do so again. “If one believes the latest data, [industrial production] rose 5.8 percent in January-February [2010] in comparison with the same period a year earlier,” and it rose 4.8 percent from January to February of this year alone.
“What do these numbers in fact mean?” Krylov asked Igor Nikolayev, head of strategic analysis at the FBK Company. The latter responded that it is difficult to interpret what these numbers mean or to make the comparisons that Rosstat is claiming because the statistics agency changed its methodology in the intervening period.
Consequently, Nikolayev continued, it is “incorrect” to claim as the powers that be in Moscow regularly do that the country’s industrial production is picking up speed. That might be true, but it might not be, either in terms of size or direction. And the decision of Rosstat to introduce these changes in the current crisis raises questions about the agency’s intentions.
The first change Rosstat made, Sergey Tsukhlo of the Moscow Institute of the Economy of the Transition Period said, was to change the weighting of the various component factors of its index, a reasonable shift given the changing structure of the industrial sector but one that makes comparisons problematic.
Specifically, the economist said, Rosstat increased the weighting given to the extraction sector and reduced that of other parts of the economy, thus giving the overall figure a boost from Russia’s petroleum production and reducing the negative impact of declines in other parts of the economy.
The second change Rosstat made, Vladimir Bessonov, an analyst at the Moscow Higher Economic School, told “New Times,” was to shift to “another classification of types of industrial production. The system it had been using made comparisons with other economies difficult but the new one makes comparisons among Russian data over time problematic.
Moreover, Tsukhlo added, this second shift further compromised the overall data because it changed the way in which the index took into account seasonable fluctuations to such an extent that it “made significantly more difficult the identification of short-term tendencies” in the development of the economy.
According to Rosstat spokesmen, the agency’s intentions were, in Krylov’s words, “noble, an adaptation to international standards of the use of data.” And they insisted that the changes that Rosstat introduced at the start of this year were “planned already before the crisis” and that “preparation for them was conducted in a regular work regime.”
“But,” the “New Times” journalist says, “why did the time for their introduction come during a crisis when attention to official economic information and especially to comparisons of indicators for various short-term periods reached at apogee among government agencies, scholars and the expert community as well as among ordinary citizens as well?”
Such shifts, whatever the intentions of those behind them, left the government and society “blinded” for a certain time, forcing both “to wander about as in a fog,” waiting for Rosstat “to harmonize the data calculated according to the old and new methods as it has promised to do before the end of April.
This absence of reliable official data has led various analytic centers to offer their own individual accounts, “using their own sources,” including in particular their own surveys of various industries. Not surprisingly, because their selections are different, the figures that they offer vary widely, some suggesting more progress than Rosstat does and others less.
But this “loss of comparable data,” Krylov continues, has broader consequences as well, leading to errors in the compilation of broader figures such as GDP which rely on Rosstat data. The economic development ministry which is responsible for GDP numbers is required “to use Rosstat data … and [this data] is distorted.”
Tsukhlo told “New Times” that the timing of Rosstat’s transition to new formulas was not well-chosen. If the agency had done this before the crisis, “then the changes would in practice not have armed [anyone],” but because it took this step in the last few months, Rosstat has left everyone wandering around in the dark.
Some in Rosstat agree. One source there told Krylov that “you don’t change horses in the middle of a stream” and that these “changes should have been put off for a year.” But the source insisted that what had happened was not the result of “a secret conspiracy or ill will but simply because responsible people in the government and Rosstat did not understand the nuances.”
FBK’s Nikolayev is less sure about that, Krylov says. The economic analyst notes the development ministry had “a desire to prettify reality” because “the pow3rs that be3 want to show everything that the crisis has come to an end. I have no other explanation than that [Rosstat’s action came as a result of] a political order from above.”

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