Here’s why Spanish GDP is rising – they’ve included illegal activities!

How to quickly make the national economy appear to be improving ahead of an election? Why, fiddle the figures of course.

In this case, Rajoy’s government has decided that to improve the PIB (the gross domestic product, GDP) of Spain, they’re going to included guesstimates of illegal drug sales and prostitution.

They’re also going to include spending on R&D, something that normally isn’t included.

In all, the illegal activities bit bump up the Spanish PIB by 0,87% or 26 billion euros, based on a 2010 study.

The whole thing appears to be a farce, they don’t even have any up to date studies on the subject, it’s all based off a 2010 study.

See, the trouble is that Brussels has announced a new set of harmonised accounting rules for all EU members for them to publish their economy figures. Spain, along with a lot of other EU countries, must now restate their national earnings.

Which means that for 2012, Spain’s economy contracted by 2,1% under the new system, instead of the official 1.6%, and in 2011, instead of growing by 0,1%, it contracted by 0,6%.

Anyway, the INE has confirmed that it’s using a little known “estimation of illegal activities” system promoted by EUROSTAT to include, amongst others, illegal gambling, prostitution, drug sales and cig smuggling. Which helps pump up the economy somewhat.

Except, of course, that these things must be guessed at. And could be good for an extra 0,5% here and there.

One Reply to “Here’s why Spanish GDP is rising – they’ve included illegal activities!”

  1. Dont be hard on Spain – other countries are doing the same thing. Also the other figures included in GDP data are also derived figures from samples and the calculations are based on methods that are periodically updated. GDP in the UK is often increased after the event and lowered in the USA – optimists and pessimist! How reliable are Spain’s stats anyway.

    Increasing your GDP in this way is not all good news too – it will show that the tax take is worse! Or do the ladies of the night file with the hacienda?

    Lets legalise all transactions and tax them all – drugs at 4% as medications but a lay at 21% !! Maybe we can get more funds to build more airports!

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