Treasury’s projected GDP growth, poverty reduction: Is there any relationship?

AS Treasury reviewed upwards its ambitious 2021 Gross Domestic Product (GDP) growth projections from 7,4% to 7,8% in its mid-term budget statement and review, many economic experts see the growth projections as unrealistic given the challenges facing the economy.

The impact of the COVID-19 pandemic has caused havoc in an economy that was already suffering from several challenges. Treasury, however, anchored its projections mainly on the rebound of the tourism sector. Many economists feel that the projections are not only unrealistic but unachievable. Expecting a 6,4% growth in a sector that has been devastated by the impact of the COVID-19 pandemic is not only unrealistic but a joke. We need to be realistic ourselves rather than being too ambitious.

There seems to be something sinister with these projections the world over. The world over governments and economists seem to celebrate the news of these GDP growth projections. But, do men and women on the street have anything to celebrate when these numbers are announced?

We have seen conflicting figures most of the time between the IMF and Treasury when it comes to these projections. Do these figures tell a story that we don’t understand? One thing we know is that these numbers come from econometric models in which a lot of assumptions are at play. Maybe the issue is, who does have the most reliable and complex model that accurately projects the figures?

A lot of questions need to be answered when it comes to these projections. Questions such as; Does GDP growth translate into wealth creation for the general populace? Does it translate to poverty reduction?

As long as these figures won’t reduce poverty, then it’s high time we started to look for other measures that translate to poverty reduction.

These GDP projections seem to be manipulated to portray an economic picture that doesn’t reflect the reality on the ground.

But can GDP growth benefit a few people in an economy, called the elite? John Perkins author of the New York Times best-selling book, Confessions of an economic hit man, argues that it is possible. Perkins elaborates how this is done and how economic models are used to portray economic growth that will end up in the hands of a few people called the elite.

This sounds very true because despite all these positive GDP projections the poverty gap seems to widen each day.

The economy is producing many poor people who can’t make ends meet. Maybe it’s due to the government’s misplaced priorities.

Year-in-year-out, Treasury projects economic growth but the populace doesn’t see any growth. What they see is increased poverty.

Is it because there is a positive correlation between GDP growth and an increase in poverty?

The Chinese model seems to be a good one in which they can calculate the number of people they have uplifted from poverty, the number of people who were made millionaires and billionaires and their target going forward.

This sounds more realistic and measurable. I think we once tried this with the two million jobs mantra which never came to fruition. Objectives must be smart, period.

Maybe it’s the right time to follow the Bhutan government’s philosophical guide, the gross national happiness (GNH).

The philosophy includes an index that is used to measure the collective happiness and well-being of a population. The term gross national happiness was coined in 1972 during an interview by a British journalist for the Financial Times at Bombay Airport when the then king of Bhutan, Jigme Singye Wangchuck, said: “Gross national happiness is more important than gross national product.”

In 2011, The UN General Assembly passed resolution “Happiness: towards a holistic approach to development” urging member nations to follow the example of Bhutan and measure happiness and well-being and calling happiness a “fundamental human goal.”

GNH is distinguishable from GDP by valuing collective happiness as the goal of governance, by emphasising harmony with nature and traditional values as expressed in the nine domains of happiness and four pillars of GNH.

The four pillars of GNH are: sustainable and equitable socio-economic development, environmental conservation, preservation and promotion of culture, and good governance.

The nine domains of GNH are psychological well-being, health, time use, education, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards. Each domain is composed of subjective (survey-based) and objective indicators.

Another similar model is the World Happiness Report model, though critics argue it’s not the best model. According to its 2018 Happiness Index, Finland was the happiest country in the world.

Norway, Denmark, Iceland and Switzerland hold the next top positions. The report was published on March 14, 2018 by the UN.

Zimbabwe ranked 144 out of 156, a decline from 138 in 2017 (The World Happiness Report, 2018).

But surprisingly, GDP growth (annual %) during that period, according to the World Development Indicators (2019), was 0,75% in 2016, 4,7% in 2017, and 6,1% in 2018.

What a contrast? If we go by this trend certainly, the projected 7,8% GDP annual growth rate will not at all benefit the populace if it’s achieved.

The Happiness Index ranked countries according to the weighted average score of variables measured on a scale running from 0 to 10 that is tracked over time and compared against other countries.

The variables include real GDP per capita, social support, health, life expectancy, freedom to make life choices, generosity, and perceptions of corruption.