The recent updated gross domestic product (GDP) estimates for African countries released by the International Monetary Fund’s (IMF) World Economic Outlook (WEO), which put South Africa as the largest economy on the continent has been faulted by KPMG as spurious, saying that the calculations behind the assertion are methodologically incorrect.
The international professional services firm providing audit, tax and advisory services, says the reported US dollar estimates are based on GDP data from the end of 2015 while the exchange rate readings are from August 2016, which makes the calculations spurious.
It was widely reported that South Africa had overtaken Nigeria as Africa’s biggest economy in dollar terms owing to the strengthening of the rand rally and the devaluation of the naira in June 2016.
Calculating the GDP numbers using last year’s IMF figures and this year’s currency exchange numbers shows that South Africa’s economy is worth around $301 billion and Nigeria’s $296 billion, according to the International Monetary Fund’s (IMF) World Economic Outlook (WEO).
However, KPMG is casting doubt on these calculations, saying that it is methodologically incorrect.
“The reported US dollar estimates are based on GDP data from the end of 2015, while the exchange rate readings are from August 2016. The time difference between the two data points makes these calculations spurious at best and not really a reliable indicator of recent developments.”
It noted that in order to reflect the impact of the naira devaluation and the rand’s recovery on comparable GDP estimates, a calculation would need to be made based on GDP data for the second quarter of 2016.