Lies, damn lies and statistics

Disclaimer. I’m not an economist or a statician, and I don’t have any governmental internal information. I’m only a spaniard.

I’ve just read a piece of news about Moody’s considering Spanish outlook stable. Although I don’t foresee a default’s risk, I completely disagree. I think Spanish conditions are deteriorating very fast. I recommend reading this article on Moody’s decision.

Anyway, I remembered reading that in recent months Government’s income and expenses figures have been alarming. Usually, when I get contradicting information I tend to go to the original source. In this case I went to this official paper containing income and expenses. The report is in Spanish, and considers two methods for calculating data. One would be in terms of cash flow, and the other in terms of obligations. It shows data up to June 2009. I went to pages 22 and 23, and compared this year cash flow data with data from 2006 to 2008, so that I could figure out total non financial income and non financial expenses for this year.

Expenses seems to be rather predictable. For the past year month by month one can see similar expenses in terms of the total expenses amount for the whole year. This year seems odd, but I don’t thing I’ll miss if I write that total expenses for the whole year would be in the range of 180 billion euros (180,000 million euros).

However, when looking at incomes, one can see the problem. And the problem is that incomes figures have crashed. To the point that from April to June, income was 470 million euros, which is roughly 1/20th the amount in recent years for that period. I don’t see it recovering in coming months, so I wouldn’t expect more than 60 billion euros.

Subtracting expenses from incomes, I get a total deficit for the year of 120 billion euros. Which means that expenses are three times the incomes.

Hey. I wish I could spent 3 times what I earn.

Anyway, what’s more shocking for me is that usually we don’t get deficit as a part of expenses, but as a part of GDP. If I divide 120 billion by 1060 billion (total Spanish GDP), I get 11,3%. The usual prediction you can get it’s in the range of 10%, so probably my figures are wrong (see disclaimer above).

But then I thought “What deficit would Spain have if incomes were 0?”. 180 billion divided by 1060 billion. I get 17%.

Deficit as percentage of GDP has no value for me as a citizen. Because I cannot evaluate how good or bad is the figure.