This morning, a rather alarmist piece on FT Alphaville (which has since been taken down) explained that Spain had been lying about its current GDP position, cooking the books to make them look good for potential investors and the broader market.
Right, not surprising.
What was surprising is that the anonymous report pointed to a massive 17.3% collapse in GDP for the country.
Spanish economist Luis Riestra Delgado points out that the piece on FT Alphaville ignores the impact of the changing trade balance deficit on GDP. Because Spain has reduced its imports by 5%, its trade deficit declines, and that is a boost to GDP.
Reminder on how GDP is calculated, from Luis Riestra Delgado:
GDP = Private consumption + Investment + Public spending + Trade Balance
Delgado doesn’t doubt, however, that Spain is fudging its numbers. It is doing this through its collection of economic data, he says, which then is corrected later on. The numbers, however, make the situation look better now than it actually is.