National Accounts Framework

National Accounts Framework

Operational Material

2

Outline

Topics to be covered Lessons learned from 2005

Comparability problems

Data and Metadata

System of National Accounts

Exhaustiveness of GDP

GDP expenditure aggregates valuation

Comparison-resistant areas

Copyright 2011, The World Bank Group. All Rights Reserved3

What is the ICP?

Using PPPs instead of market exchange rates makes it possible to compare the output of economies and the welfare of their inhabitants in real terms.

ICP is a worldwide statistical initiative to collect comparative price data and estimate purchasing power parities (PPPs) of the world’s economies.

PPP Vs. Exchange

Rate

Main Objectives

Provide international price and volume comparisons of Gross Domestic Product (GDP) and its component expenditures

Measure the differences in price and volume levels of GDP and GDP per capita of various expenditure aggregates and sub-aggregates

between countries within a region

between countries in different regions

Objectives

Copyright 2011, The World Bank Group. All Rights Reserved

By Households

By NPISHsIndividual

Consumption Expenditure

110

Price

By Government

By GovernmentCollective Consumption

Gross Fixed Capital

Formation

Machinery & Equipment

Construction & Civil Eng.

Others

Other Components

Changes in inventories

Net Exports

Value

From ICP Objective to N.A. in ICP

Quantity

Volume Ratio Value ratio PPP

GDP Expenditure Values for 155 Basic Headings, for the reference year 2011

Prices for over 2000 representative products collected over one year in 2011

4


Pressures caused by the need to develop new procedures to collect and validate data led to insufficient attention to the national accounts until late in the process

5

Identified issue

Goals for 2011 ICP to focus on

Improving the quality of real expenditures by collecting national accounts data earlier in the process

Identifying the basic headings that are most likely to have a significant impact on the consistency between economies

Lessons from the 2005 ICP


1993 SNAThe ICP requires national accounts estimates based on the 1993 SNA

Exhaustiveness of GDP

Various terms are used to describe parts of GDP that fall outside the scope of admin records and statistical surveys on which the national accounts are based

― underground economy, black economy, non-observed economy, informal economy

All economic activities have to be included, whether legal and illegal

Comparability Problems


Observed

Non-Observed

Legal

Illegal

FormalInformal

Terms do not always refer to the same thing across economies

Informal economy and the non-observed economy may largely overlap

It is likely that GDP in most economies includes some of the informal economy

Subsistence production/consumption is a potential area of understatement

The scope of economic surveys may exclude some businesses

Comparability Problems [Cont’d]


8

Major Aggregate Data

• Validated major aggregate data• Metadata• Population and exchange rate data

Basic Heading Data

• Validated basic heading data• Metadata• Population and exchange rate data

Latest Data Available between 2006-2009

Final Data and Metadata

2011 Data

Preliminary Data and Metadata

Final Data and Metadata

Data & Metadata


Global Office recommends 5 approaches

• Direct estimation

• Extrapolation from a recent year or 2005

• Borrowing a per capita volume related to a particular basic heading from an economy in the same cluster

• Borrowing from an economy in the same cluster a structure related to a class, sub-group or group related to a particular higher level heading

• Splitting a value using expert opinion

Estimating basic headings expenditures

10Copyright 2011, The World Bank Group. All Rights Reserved

A summary measure that captures the economic activities

Gross Domestic Product


A comprehensive, integrated set of economic accounts, balance sheets,

and other tables describing the economic processes taking place within

a country and the associated stocks

1993 SNA

2008SNA



• The SNA provides the concepts, definitions, classifications, and accounting rules often used as standards for economic statistics in general.

Household expendituresGovernment expenditures Investment International trade

WagesProfits

Industry:agriculturemanufacturingconstruction. etc.

System of National AccountsProductionIncomeConsumptionCapital formationBalance of paymentsInput-output (supply-use)Financial accounts (flow-of-funds)Balance sheetsVolumes

Institutional sectors: Households

Nonprofit institutions serving households (NPISHs)Financial corporationsNonfinancial corporationsGeneral government

Rest of the world

Economic statistics collections

National Accounts as a Framework


Comprehensive

Consistent

Integrated

All designated activities and the consequences for all agents in an

economy are covered.

Identical values are used to establish the consequences of a single action for

all parties concerned using the same accounting rules.

All the consequences of a single action by one agent are necessarily reflected in the resulting accounts, including the impact on the measurement of wealth

captured in balance sheets.

Bird’s-eye view of the economy

Comparison across countries

on the same ground

Source: System of National Accounts 2008.

Justification of the National Accounts


Final consumption expenditure

Taxes less subsidies on production

Net savingConsumption of fixed capital

Intermediate consumption

Output

Changes in inventories

Gross fixed capital

Net acquisition of valuables

Value added

Exports and imports

Goods and services

Transactions with rest of the world

Accumulation

Production

Distribution and use of income

ECONOMY

Diagram of the Integrated Accounts


Household final consumption expenditure

Final consumption expenditure by NPISHs

Government final consumption expenditure- Individual consumption expenditure by government- Collective consumption expenditure by government

Gross fixed capital formation

Change in inventories

Net acquisitions of valuables

Balance of exports and imports of goods and services

General rule: Transactions are valued at the market prices (or purchasers’ prices).

GDP Expenditure Aggregates Valuation


• Valuation – Recorded as the purchasers’ prices paid by households,

including any taxes on products that may be payable at the time of purchase

Price difference

Market imperfections

Deliberate price discrimination

Price collectors need to consult with the national accountants.

Household Final Consumption Expenditure


NPISHsIntermediate consumption

Government

Compensation of employees

Consumption of fixed capital

Other taxes, less subsidies, on production

A sum of costs incurred in their

production

Input-price approach

Nonmarket production

No market for collective services such as defense

Differences between the types and quality of services provided when sold alongside the nonmarket services

Productivity differences between countries need to be carefully factored in.

Non Market Services


• Valuation – Cannot be valued at the prices at which they sell their

output because these prices are “not economically significant.”

– Estimated as the sum of their costs of production

Intermediate consumption

NPISHs

Compensation of employees

Consumption of fixed capital

Other taxes, less subsidies, on production

A sum of costs incurred in their

production

Less any payments received from households for services provided

Input-price approach

NPISHs


1. Individual consumption expenditure by government

• Valuation

2. Collective consumption expenditure by government

• Valuation– Valued at cost using cost components similar to those listed for

NPISHs

Production of services by government for the benefit of

individual households

Purchase by government, from other producers, of goods and services that are then passed

on to households

Valued at cost in the same way as for NPISHs

Valued at purchasers’ prices —cost to government of buying the goods and services from

other producers

Government Final Consumption Expenditure


• Valuation– Valued at purchasers’ prices, including the cost of transport,

the cost of installation, and any fees or taxes for transfer of ownership

1

2

Own-account production of fixed

capital assets

Valued at basic prices (equal to

producers’ prices, minus product

taxes)

The 1993 SNA does not include

R&D expenditures.

The 2008 SNA includes R&D

expenditures as capital formation.

Gross Fixed Capital Formation


• Valuation

1

2

Inventory

Valued at the prices at which they could have been sold when first produced

Valued at the prices at which they can then be sold

Recording

Change in inventories

Valued at the average prices ruling during the year

avg

BB

avg

EE P

PBVPPBV

BVE =book values of inventories at the end of the yearBVB=book values of inventories at the beginning of the yearPE= price index of inventories at the end of the yearPB= price index of inventories at the beginning of the yearPavg= price index of average inventory prices for the year

Changes in Inventories


• Valuation – Participating countries are requested to report both the

purchase (acquisitions) and sales (disposals) of valuables . – A reference PPP will be used for valuables in the 2011 ICP.

Acquisition of Valuables


• Valuation

Exporting country

Importing country

f.o.bprice

c.i.f.price

– Only the total export (import) values for the ICP, so that valuation on either an f.o.b. or a c.i.f. basis does not affect the values

– A reference PPP (exchange rates) will be used because of the different structure of exports and imports in countries.

Net International Trade


Government services

Conceptually Comparison-Resistant Practically Comparison-Resistant

Own-produced goods

Barter transactions

Income in kind

Rent of owner-occupiers

FISIM

Health and education

Construction

Imputed expenditures

Comparison-Resistant Areas


• ICP Web site• National Accounts Framework in ICP • System of Accounts 1993• System of Accounts 2008

Sources of References

Thank You

National Accounts Framework

Documents

Transcript of National Accounts Framework