the euro zone

Rewriting history

Annual predictions for Spain's GDP growth are changed several times a year by the Spanish government and various national and international economic bodies. That much we already know. But what we learnt this week was that the Spanish economy's performance in years past can also be tinkered with: on Tuesday, Spain’s National Statistics Institute (INE) said that they’d done some re-calculating (I paraphrase) and that actually Spain’s growth in 2015 was 3.4%, not the previously stated 3.2%, and that last year it was 3.3% rather than 3.2%. The INE said that it made the revisions because export levels had been greater than previously thought.

You can’t help wondering whether Mariano Rajoy’s government employs someone to do a job similar to the one that Winston Smith performs in George Orwell’s 1984. Smith is employed by the ironically-named (to put it mildly) Ministry of Truth to rewrite the headlines of old newspapers according to what Big Brother says happened, not what actually happened (in fact, the two are the same in 1984). That the 2017 projections for Spain’s GDP growth are frequently revised (always upwards, of course) encourages us to regard each new figure as temporary: but now that previous years’ economic performances are being altered, it seems possible that the “actual” growth rate for this year could be tweaked as well.

Of course, altering GDP growth statistics by tenths of a percentage point is nowhere as near as sinister as rewriting old headlines. But what it does - or should - do is make us look upon any such figures with scepticism.

Certainly, we would have been foolish to take any of the growth predictions made so far this year as definitive. Spain’s economy minister Luis de Guindos recently stated that it was “perfectly reasonable” for GDP growth in 2016 to exceed last year’s, begging the question of what 2016’s expansion rate really was. But this shouldn’t surprise us, because Rajoy announced in July that the rate of expansion in 2017 would be 3% - much better than the 2.7% he’d previously projected. He thereby brought the government’s prediction closer to the 3.1% predicted by the Bank of Spain - a figure the Bank released in June, thus cancelling its original 2.8% projection. In July, the IMF also revised its growth forecast for Spain this year, from 2.6% to 3.1%.

These revisions seemed to be heading towards the magic figure of 3.2% - the rate at which Spain’s GDP was initially said to have expanded last year: the idea being that if there’s no drop in macroeconomic momentum, Rajoy can maintain that his government is the only party fit to run the economy. But given that last year’s growth rate has now itself been increased, we might see another couple of tweaks to the 2017 projection in the coming months, so the new figure of 3.3% is reached.