Gross domestic product (GDP) is the most widely used indicator of a country’s economic performance. GDP is the measured monetary value of all the goods and services produced within a country’s borders in a specific time period.
Over the past years, enormous changes have taken place in the rest of the world as well as within Maldives that influences the economic structure. Moreover, the fluctuations in the prices of services and products are noteworthy.
The GDP of an economy can be measured either in constant prices (real, or in volume terms) or current prices (nominal). The changes in the economic growth are best compared by changes in constant prices.
While nominal GDP measures the value of products and services (including the price and volume), the constant price GDP measures any changes in the volume of production, eliminating the changes in the prices of products and services by keeping the price level constant at base year levels. Thus real GDP depicts a clear picture of changes in the actual production level of the country.
Rebasing of GDP means replacing the old base year used for compiling the GDP with a new, more recent, base year for computing the constant price estimates. As relative prices and the structure of the economy change over time, it is necessary to update the base year frequently. The UN Statistical Commission (UNSC) in particular recommends rebasing of GDP every five years.
Rebasing the constant price series also provides an opportunity to make changes to the current price estimates. Such changes may include:
After more than ten years, the Maldives GDP estimates are now rebased to 2014 from 2003. Within the past 11 years the Maldives has experienced large changes in relative prices as well as rapid economic development. Expansion of international trade, introduction of a new tax system, and expansion of sectors that provides services the tourism sector and technological changes are a few examples of such changes.
This report provides a brief background of the national accounts system, and a brief history of rebasing in Maldives. It also provides the conversion and linking methods used in deriving a consistence GDP time series. Finally, the report analyses the differences between the two base year estimates, the major changes that have occurred due to the rebasing process, and outlines the reasons for these changes.
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