Math dispute adds 40 billion kroner to national economy

November 26th, 2013

This article is more than 10 years old.

EU calculations reveal that the national economy is doing better than thought, but Statistics Denmark is unsure about the accuracy

A 40 billion kroner miscalculation has made the economy look much worse than it actually is.

According to investment bank Nykredit Markets, new numbers reveal that the national growth rate between 2005 and 2012 was 2.1 percent higher than previously thought, adding 40 billion kroner to the national economy.

The reason behind the error is that Statistics Denmark didn't follow EU guidelines for calculating economic growth that were implemented in 2006 .

Head analyst in Nykredit Markets, Tore Stramer, is surprised that the national statistic database didn't follow the same instructions as other EU countries.

"It means that the economy wasn't doing as bad between 2010 and 2012 as we thought," Stramer told Politiken newspaper.

Avoided new method on purpose
Not all EU nations use the new calculation method and Statistics Denmark decided not to implement it before it was sure that it is reliable, said its head of office, Nura Devici.

“We have decided to wait until we have a solid method that we can vouch for, and the EU has changed its guidelines before” Devici told Politiken. “We want to be sure that method and data are reliable before we implement anything.”

She explained that while the previous calculation method was based on the costs spent on production in the public sector, EU’s new method measures the amount of production in the public sector – such as the number of operations at hospitals. The problem is that the new method doesn’t take quality changes into consideration, according to Devici.

Despite the doubts, Devici said that Statistics Denmark will implement the EU calculation method by September 2014.

Still in a crisis
Although the national economy may look better under the EU calculation method, the head economist at Danske Bank, Steen Bocian, warns that we are still in a financial crisis.

"If we only look at GDP, it is true that we haven't been in such a crisis as we thought," Bocian told Politiken newspaper. "But if we measure employment rates or house prices, we have been in exactly as much of a recession as we thought. If we look at what you and I spend, the crisis remains the same. But if we compare our economy to the international market, it does appear that we are better off than we thought."


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