Final Word from Thursday, February 3, 2011

Some readers who don't share our skepticism of the worthiness of GDP figuresmissed the joke yesterday about the need for Prague city hall to borrow even moremoney. The idea was that relying on GDP data can give a false impression of a city orcountry's economic health. One problem with GDP, as Tomáš Sedláček of the NERVeconomic council bravely pointed out at a recent Nordic Chamber event, is that themore a country borrows, the higher its GDP. The real economy might be struggling,but government borrowing can offset it and give the false impression of healthygrowth. Nearly everyone knows that Czech GDP is supposed to grow by about 2%this year, but how many people know that Czech government debt is supposed togrow by 10.5%? Without this additional government borrowing, there would actuallybe no real growth in Czech GDP this year. Nor last year, for that matter.

Glossary of difficult words

worthiness - the character or quality of being worthy, of deserving attention or respect;

NERV - National Economic Council;

to struggle - to strive with difficulty to achieve or attain something;

to offset - to counterbalance, cancel out;

government debt - see Table 1-1 and Table 3-7 in the linked document.


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