IMFSurvey Magazine: What the Numbers Show
IMF technical assistance
IMF Backs UAE in Statistics Overhaul
By Claudia Dziobek and Florina Tanase
IMF Statistics Department
November 26, 2007
- Statistics shortcomings seriously constrain analysis, policy formulation
- Introduction of monthly consumer price index will be major improvement
- Wider strategy aims to strengthen data-producing agencies coordination
The United Arab Emirates (UAE), determined to improve its statistical system, is constructing a monthly consumer price index—set for introduction in almost two years' time—with the support of IMF technical assistance.
In 2005, the UAE, faced with growing oil revenues and concerned that shortcomings in the country's federal statistical system imposed serious constraints on analysis and policy formulation, approached the IMF to discuss collaboration for the development of key statistical indicators, particularly a monthly consumer price index.
Since then, with the help of the IMF, progress has been made in constructing this closely watched economic statistic, which is now set for introduction in May 2009. The UAE authorities have also expressed interest in additional technical assistance for implementing a wider strategy aimed at improving coordination among the seven emirates' main data-producing agencies.
Need for good data
Good economic data are a precondition to effective macroeconomic management. With the complexity of modern economies and the lags inherent in macroeconomic policy instruments, a country must have the capacity to promptly identify any adverse trends in its economy and to apply the appropriate corrective measure. This cannot be done without economic data that are complete, accurate, and timely.
The CPI, whose percent change is a measure of inflation, is among a country's most closely watched national economic statistics. It measures the average price of consumer goods and services purchased by households, can be used to index (that is, adjust for the effects of inflation) wages, salaries, pensions, or regulated or contracted prices.
In the UAE, the Ministry of Economy compiles an annual CPI. This index covers the whole country, but it suffers from methodological shortcomings and is disseminated with a lag of three months—not quickly enough to meet users' needs.
Constructing the CPI
During the 2005 Annual IMF-World Bank Meetings in Washington, DC, while meeting with Sultan Bin Nasser Al-Suwaidi, governor of the UAE's central bank, a representative of the IMF's Statistics Department suggested a comprehensive approach to building a monthly CPI.
At a macro level, this would involve strengthening the institutional framework by improving coordination among the data-producing agencies of the seven emirates and collaboration of federal and emirates agencies, as well as setting out a well-defined role for the central bank in supporting the development of the index. At a micro level, a household survey would be the right place to start for constructing the index. This advice was based on information gleaned from a 2003 staff visit to the UAE.
Continued dialogue between UAE authorities and IMF staff, which resulted in a solid understanding of the country's statistical needs and constraints, prepared the ground for rapid development of the monthly CPI, starting in early 2007. An IMF team visited Abu Dhabi, provided technical advice based on cross-country experience, and agreed with the authorities on a work plan for the development of the index.
At first, an interim price index would be released, in advance of the more robust CPI, to satisfy the need for more timely information. And a monthly CPI, compiled in accordance with international standards, is set to be released in May 2009. To help achieve these goals, the Ministry of Economy has assigned three full-time staff to the project and has hired a CPI expert.
The project target dates take into account several requirements. Most important among these is a new household expenditure survey that is currently being carried out and will provide the source data for the CPI weights. The survey spans April 2007-April 2008 and, in contrast to the 1997/98 survey, covers not only Abu Dhabi but all seven emirates.
Once carried out, the household survey, according to standard practice, may require 3-6 months for data review and follow-up. Furthermore, the CPI staff will need to apply the new weights to the compilation system and implement a methodology to link the new index with the old index. The authorities also will need to prepare a communication strategy to inform principal users, and the public, about the new index.
Building better coordination
For the future, coordination among the UAE's federal and the seven emirate data-producing agencies will need to be strengthened. To that end, the government has already made some significant inroads as part of a three-year strategy to overhaul federal government statistics.
To begin with, it has created the political consensus required for building a strong and sustainable statistical system to support economic policy, and has helped build consensus across agencies to bring statistics up to international standards. In addition, in April 2007, the cabinet approved the creation of the National Bureau of Statistics, which will be responsible for official statistics, including compilation of price statistics.
The 1974 Statistical Law is also being revised to give the National Bureau of Statistics the professional independence and the authority to undertake its respective activities, such as compilation and dissemination of national accounts and price statistics. As the UAE prepares to participate in a currency union with the Gulf Cooperation Council countries, these steps are important, as is coordination of statistical activities to achieve cross-country comparability.
Looking ahead, the authorities plan to take part in the IMF's General Data Dissemination System (www.dsbb.imf.org), which provides a useful framework to lay out a plan of action. Additional technical assistance from the IMF, for which the authorities have expressed an interest, will also help push forward the implementation of the new statistical strategy.