Lee calls for change in method to calculate GDPBank of Korea Gov. Lee Ju-yeol has stressed the need to improve methods to calculate gross domestic product (GDP), saying that the current economic indicator has become inaccurate as the digital economy expands across borders.
“Trust in the GDP figures has been undermined as the portion of service industry in our economy increases and the digital economy expands, which is not taken into account when counting the GDP,” Lee said. “It is time to think twice what the 0.1 to 0.2 percentage point difference in GDP growth means.”
He was speaking at a roundtable meeting on Wednesday with macroeconomics professors and heads of the nation’s major economic research institutes.
The emergence of the sharing economy and online transactions is another factor that weakens the accuracy of GDP estimates, Lee explained, referring to a recent article from British magazine The Economist.
Lee said that the article emphasized that the existing GDP calculation doesn’t include or undermines new economic values created via services like Uber, Airbnb, online shopping and Internet banking transactions.
Lee suggested that the central bank will come up with an enhanced calculation method using a wider variety of data, including big data gathered online.
“The BOK is planning to develop a new economic indicator that better reflects quality of livelihood, by including big data gatherable online,” Lee said. “We’ll focus on strengthening our analysis capabilities to be able to read the meaning behind the sheer GDP numbers.”
A similar initiative is being pushed by the French government, which is working with a team including Nobel Laureate Joseph Stiglitz, on developing an alternative economic indicator to GDP.
Last month, the central bank lowered the GDP growth forecast for this year to 2.8 percent, from January’s 3 percent. This is still higher than the state-run Korea Development Institute’s 2.7 percent announced Tuesday and the Organization of Economic Cooperation and Development’s 2.6 percent.
BY KIM JI-YOON [firstname.lastname@example.org]