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#6 - JRL 7218
Moscow Times
June 11, 2003
Income Statistics Called Deceptive
By Boris Grozovsky and Rinat Sagdiyev

The State Statistics Committee forecast that real incomes would rise almost two times faster than they actually have, and many firms say this lack of reliable official data has forced them to commission their own economic studies.

Independent researchers said incomes in January rose not by 16 percent against the first quarter of 2002, as the government's statisticians had predicted, but by 9.4 percent to 10.6 percent.

From the start of the year, the committee has baffled economists with its rosy statistics, which indicated fast growth in the population's income, contrary to trends in other indicators.

Official committee figures, corrected for inflation, say that for January to April, the population's income grew 14.4 percent on the year. Yet at the same time, real wages grew a more modest 9.1 percent while retail sales rose just 8.9 percent.

The discrepancy among the committee's own figures was even greater in January to February. The committee said incomes grew 17 percent, while wages and retail turnover were reported to have risen 9.9 percent and 8.4 percent, respectively.

The committee lacks direct data on citizens' income, and is forced to extrapolate its projections from other numbers like documented wages, taxes and spending.

Companies report only wages officially paid to employees, leaving self-employed businessmen's salaries and returns on investments to fall through the cracks. Spending, then, is used as an indirect indicator of an individual's income level.

To flesh out the overall picture, the committee also considers the amount of taxes paid in the country, gross currency bought on exchanges and ruble savings in cash and in banks.

This methodology is flawed, say economists at two institutions, the Center for Development and the Center for Macroeconomic Analysis and Short-Term Forecasting.

They complain that statistics take into account gross hard currency purchases and not the difference between what was bought and what was sold, said Andrei Klepach, head of the Center for Development.

Much of the currency bought is ultimately changed back into rubles and that amount should be excluded from data on hard currency savings, he said.

Nor do the official figures capture trends in currency deposits, specifically the growing tendency to save rubles rather than dollars or euros, said Igor Polyakov of the Center for Macroeconomic Analysis.

As a result, the government statistics on the population's real income are inflated because they reflect exchanges' increased turnover, Klepach said.

Having run their own calculations for January-April, Klepach's institute says real incomes grew 9.4 percent on the year rather than the state's estimate of 16 percent. Polyakov's institute put the figure at 10.6 percent.

Some consumer goods companies said they do not trust the government's income estimates, and opt instead to come up with their own.

"We forecast demand based on marketing surveys and our own intuition," Sun Interbrew vice president Irina Kibina said. "If the statistics committee data doesn't correspond to our assessments, we go with our own."

Statistics for the population's income influence the country's balance of payments, Klepach said, and banks use this to predict demand for ruble and hard currency deposits.

"Banks actively use the official government figures, and are wary of the fact that they are conditional," Rosbank analyst Valery Petrov said.

Yevsei Gurvich of the Economic Expert Group said the official methodology's failings have been long known; it has only become more glaring now with the ruble's appreciation and a shift in people's currency preferences.

"The dual hard currency counting must be gotten rid of," said Sergei Nikolayenko of the Bureau for Economic Analysis.

The State Statistics Committee said it may change its methodology. "We are improving our methods all the time," said Olga Mukhanova, head of living standards statistics.

"We need to see what the economists suggest," she said.

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