Czech economy better off than previously reported by Czech Statistics office

The Czech Statistics Office has been hit by a scandal that has shaken the institution's otherwise spotless reputation. Some heads in management have fallen and more may follow. The reason: a mistake in the country's GDP result announced for the third quarter of 2002 - so wide of the mark it was believed the Czech Republic was entering a period of economic slowdown, instead of moderate growth.

Czech economy better off than previously reported by Czech Statistics office

Logo of The Czech Statistics Office

The news announced late last week came as a shock to the Czech government as well as economic analysts - the Czech Statistics Office's admission it had reported erroneous figures for the third quarter of 2002 off by an incredible 40 billion crowns: originally the office had reported a 100 billion crown foreign trade deficit for the first eleven months of 2002 - now it appears the real number was 55 billion. The impact on the Czech economy? Manifold and serious: the situation saw the Finance Ministry, government economists, businesses, and potential investors, not to mention the Central Bank, working with inaccurate information about the Czech economy for the last few months of the year, information that stated GDP growth had slowed to 1.5 percent, down from 1.9 percent in the second quarter. However, it has now come to light, the real figure is approximately twice as high. The mistake affected all prognoses about the direction of the economy, including government decisions and the Central Bank's setting of interest rates. The head of the Czech Statistics Office Marie Bohata:

"Of course the mistake is very regrettable and personally I am very sorry. But mistakes happen in all fields and the important thing is the steps one takes to correct the situation."

So, how does one make a mistake in the ballpark of 40 billion lost crowns? The Czech Statistics Office was quick to respond by saying it wasn't the mistake of the office at all, but a failure on the part of customs office to properly record export figures based on a new by-law. Still, the Statistics Office has a clear responsibility for checking the figures it gathers: more than a few economists were left shaking their heads at the bewildering slow-down of exports figures in the Czech Republic, for example to Germany, compared to figures posted by neighboring Slovakia. Blamed was the influence of the German economic recession, the strong Czech crown, and last summer's terrible floods. Instead, it has now come to light, it was a mistake in statistics tabulation. Two people have been fired so far in connection with the scandal: the head of the Statistics Office's Foreign Trade section, and the head of the section for cost statistics. Not surprisingly, there have also been calls for the head of the Statistics Office Marie Bohata to resign, a recommendation even put forward by Prime Minister Vladimir Spidla. But, that is something Mrs Bohata has said so far she will not do, since she feels unfair political pressure is being exerted on an institution that above all defends its independence.

"First and foremost the Statistics Office is an independent institution and it is a bureau which must have a good professional reputation both at home and abroad. For me personally these are the most important values for which I stand, and I am willing to put all my energy into upholding them."

For additional in-depth analysis on this story tune in to this week's Economics Report on Thursday.