Eurozone government debts revised down under new ESA2010 GDP measure
A change in the way the European Union measures gross domestic product has left governments with slightly smaller deficits and debts, according to figures released by the bloc’s statistics agency Tuesday.
Based on the newly adopted European System of Accounts 2010 ( ESA 2010) methodology, Eurostat now calculates the gap between what the 18 eurozone governments spent and what they raised in revenue during 2013 was 2.9% of GDP, down from the estimate of 3.1% using the earlier, ESA 95 methodology.
Similarly, government debts are now calculated to total 90.9% of GDP, below the 92.7% they would have been equivalent to under the old methodology.
ESA 2010 is intended to give a more accurate picture of what gets produced, spent and invested within the 28-country bloc.
The most significant change is that spending on research and development—whether by companies or the government—will be counted as an investment that creates value, or assets, for the future, just like spending on new machinery or infrastructure. Previously, this was recorded as “intermediate consumption” meaning it was deemed to be consumed at the end of each year or quarter.
Another boost to GDP figures will come from a similar change in the treatment of military expenditure, which will also be viewed as an investment for the future.
Among ESA 2010’s early accomplishments has been turning what we thought was a second-quarter stagnation into three months of 0.1% growth.
