By Helmo Preuss

The news that Statistics South Africa (Stats SA) has previously underestimated the level of manufacturing sales by 17% in 2003 could mean that South Africa's nominal gross domestic product (GDP) could be revised higher by as much as 20%.

This is because manufacturing's share of GDP should have declined between 1995, the existing base year for national accounts, and 2003, in line with similar trends elsewhere as economies became more services-orientated.

In June 1999, Stats SA revised nominal GDP by more than 15% as it moved to the 1993 System of National Accounts.

As nominal GDP is used as the denominator for various crucial ratios, this improved South Africa's credit rating.

Most notably, the 1998/99 fiscal deficit became only 2.9% of GDP instead of 3.3%, while the government's debt to GDP ratio shrank to 49% instead of 55%.

Similarly, the current account deficit became 1.8% of GDP instead of 2.1% for 1998.

This time the large revision is due to a move to new and improved business frame, where the sample universe is far larger than was used in the 1999 benchmarking exercise.

The only problem for financial markets is that Stats SA will only be finished with the rebasing and benchmarking exercise in November this year, although in the interim financial analysts could use nominal GDP figures between 15% and 20% higher than previously reported.

I-Net Bridge 19 May 2004