WRITTEN QUESTION E-2895/01

by Pere Esteve (ELDR) to the Commission

(22 October 2001)

Subject: Miscalculation of GDP in the Balearic Islands

Normally, the level of production of a given region is, to a great extent, reflected in the income level of local habitants, so that the GDP is habitually employed as an indicator of income. A study submitted to the Parlament de les Illes Balears by two professors from two different universities has highlighted permanent errors in the way the Balearic Islands' regional GDP is calculated; this means that in this instance, GDP and income do not correspond.

The study shows that GDP per head of population overestimates officially resident Balearic families' incomes.

There are basically four factors involved:

(a) transfers of income generated by work and by capital to the rest of Spain;

(b) use of the Spanish CPI instead of the CPI of the Autonomous Community;

(c) transfers of work and capital-generated income abroad;

(d) the under-registration of the population, which has grown very sharply in recent years.

The conclusion is that the deviation of the Balearic GDP is somewhere between 12 % and 15 %. For example, taking into account only the loss of Balearic GDP which would arise from correcting mistake (a) above, the Balearic Islands would cease to occupy the 86th place amongst Europe's 206 regions and move to the 128th place as far as GDP classification is concerned. Once of the consequences of the miscalculation is that it may have put a brake on public investment in the region.

GDP is used as the indicator for the allocation of many EU funds. The Balearic Islands, as the most recent studies have shown, may be suffering from an over-estimated GDP. EU public investment in the area may and could have been adversely affected.

Given the situation:

- what is the Commission's view of these facts? Does the Commission believe that the mistakes in calculating GDP could have affected EU investment in the Balearic Islands?

- Secondly, given that the EU regularly uses GDP as the basis of its public investment, and taking the special case of the Balearic Islands into account, with their monodependency on tourism which appears to be one of the causes of the miscalculation of GDP, does the Commission intend to use other means of calculating the region's wealth? If not, would the Commission agree to provide the Balearic Islands with economic compensation?

Answer given by Mr Solbes Mira on behalf of the Commission

(17 December 2001)

The Commission takes note of the various remarks made by the Honourable Member concerning the calculation of the regional gross domestic product (GDP) and would like to resume two methodological aspects referring to this calculation.

Firstly, regional GDP and regional income of local inhabitants are two different indicators, that are equivalent only in very special circumstances. While they may be the same at a national level, at a regional level they virtually never are. GDP is not synonymous with the income ultimately available to private households resident in a country or a region. This fact is explicitly mentioned in the methodological notes of Eurostat publications. Therefore, it cannot be concluded that if GDP and income do not correspond that the GDP figure has been incorrectly calculated because GDP and income are two different things.

Secondly, the Honourable Member recalls four explanation factors:

(a) transfers of income generated by work and by capital to the rest of Spain;

(b) use of the Spanish CPI instead of the CPI of the Autonomous Community;

(c) transfers of work and capital-generated income abroad;

(d) the under-registration of the population, which has grown very sharply in recent years.

In commenting on these points, it should be noted that none of the first three issues raised (a, b and c) are of relevance for regional GDP. While the fourth point could have a bearing on regional GDP per capita, it must be remembered that Eurostat carries out its duties within a network system, where the data collection is carried out by National Statistical Offices. In the calculation of regional GDP per capita, account was taken of regional population figures that were officially submitted to Eurostat by the National Statistical Office of Spain (INE). The Commission has no reason to have any doubt about these figures. Consequently, the impact that this GDP miscalculation would have on the investments made in the Balearic Islands is null and void and the Commission will therefore not grant any economic compensation.

Concerning the implementation of other means of calculating the regional wealth, the Commission would like to point out that from 2002 onwards, data on regional primary income and regional disposable income at NUTS level 2 will be available for many Member States. Due to exemptions granted to some Member States, a complete set of these data will not be available before 2005. It is Eurostat's intention to provide estimations before that date but currently these data are not available.