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What is the chain-linking method Saudi Arabia is adopting to calculate GDP?

Chain-linking methodology utilizes the previous year's weights and prices for a continuous update, reflecting shifts in production structure and consumption patterns.

What is the chain-linking method Saudi Arabia is adopting to calculate GDP?
[Source photo: Krishna Prasad/Fast Company Middle East]

Saudi Arabia is enhancing its economic measurement and monitoring practices, aligning with international standards for accuracy and reliability.

The General Authority for Statistics (GASTAT) announced a significant shift in how Saudi Arabia calculates its economic growth. The country has adopted the chain-linking methodology, replacing the previously used fixed base year approach. 

This move makes Saudi Arabia a leader in the region, becoming the first nation in the Gulf and Arab countries and among the first in the G20 to implement this advanced system.

The chain-linking method offers a more accurate picture of economic health. This approach factors in price changes and adapts to evolving economic activities. 

Unlike the fixed base year method, which uses a single year as a reference point, chain-linking uses the weights and prices of the previous year, providing a continuous update that reflects changes in production structure and consumption patterns.

Experts at GASTAT highlight the advantage of chain-linking for international comparisons. The method facilitates a more accurate reflection of economic growth across different countries, allowing for clearer evaluations of Saudi Arabia’s position in the global market.

GASTAT’s adoption of chain-linking aligns with recommendations from leading global statistical organizations and national accounts bodies. 

Their preference for this method stems from its ability to provide a more accurate picture of real economic growth at the national level, ultimately facilitating better monitoring of economic development and achievements.

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