By now you’ve seen the hair-raising numbers: Venezuelan GDP plunged 5.8%, year on year, in the first quarter. The detail that got me, though, was this: according to the Central Bank, the oil economy contracted by 5% and the the non-oil economy contracted by 4.9%, but the overall economy contracted by more than either of its two components. Huh?!
Update: One commenter explains what’s going on here:
The thing is that GDP growth is not the addition of variation on the oil economy plus the non-oil economy, you have to add valuation impacts of taxes and subsidies, they are called "net taxes on products", which is value added not related to real production, this factor plunged -12.4% in Q1-2010.
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The convention is that production is measured at basic prices, which is another word for before taxes and subsidies. Net taxes on products includes all the taxes over the production change net of the subsidies given, so the disproportion on the observed drop could be caused either by the fact that the leading-revenue-generating sectors are dropping the faster (manufacture, commerce and oil) or by the fact the government has increased subsidies to production (or a combination of the two)