Introduction to the SNA SEEAW Training course November

Introduction to the SNA SEEAW Training course November 2006 UN STATISTICS DIVISION Economic Statistics Branch National Accounts Section

Introduction SNA concepts Definition of assets Supply and use tables Conclusion

SNA concepts

System of National Accounts n n The national accounts are the source of information about the state and performance of the economy It conveys information about the performance of the economy in a similar way as that of the operating and financial accounts of an individual firm

The broad objective of national accounts To integrate and reconcile data for economic analyses and monitoring. It is central to all economic statistics developments By linking micro and macro data it provides an integration across a wide range of statistics It adds value to diverse data sets through integration The framework is not only for GDP estimates, but is also useful for other groups of statistics related to BOP, GFS, financial activities and environmental accounts

Structure of the SNA A set of national accounts provides: A comprehensive and detailed recording of the flows and stocks of an economy in a systematic and integrated manner.

Flows and stocks Stocks are holdings of assets and liabilities at a given time Fixed capital, inventories, money and wealth Flows reflect the creation, transformation, exchange, transfer or loss of economic value Flows provide a “moving picture” of the economy Production aggregates, consumption expenditure, investment and saving are all flow variables

Flows and stocks The way flows and stocks are recorded is governed by a number of specific rules and conventions aiming at quantifying the economic entries as precise and consistent as possible. These have to do with timing, valuation, and the boundaries that distinguish economic flows and stocks from non-economic variables.

Compilation n Compilers of the NA have to content with all sorts of conceptual and data problems To cope with these problems a variety of conventions are used to classify, measure and exclude various items The NA are compiled in accordance with the System of National Accounts (SNA)

Gross domestic product (GDP) n The GDP is the total value of goods and services produced within the boundaries of a country in a particular period

GDP methods There are three ways to calculate the gross domestic product of a country Total value of production = Output - intermediate consumption Total value of final sales = Final consumption + Capital formation + Exports - Imports Total income earned = Compensation + Operating surplus

Gross national income (GNI) n n – – n In a particular period (say one year) residents (citizens of the country) earns income in other countries and foreigners earn income in your country GNI is calculated by: adding the income earned by residents in other countries to the GDP; and subtracting the income earned by foreigners in your country The GNI is the amount a country has available for consumption and saving.

Standard Industrial Classification of all Economic Activities (ISIC Rev 3) A+B. C. D. E. F. G+H. I. J+K. Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas and water Construction Wholesale and retail trade, hotels and restaurants Transport, storage and communication Financial intermediation, insurance, real estate and business services L+M +N. Public Admin, education, health, social work O. Other community, social and personal services

Standard Industrial Classification of all Economic Activities (ISIC Rev 4) A. B, C, D+E. of which C. F. G, H+I. Agriculture, forestry and fishing Mining and quarrying, manufacturing, electricity, gas and water Manufacturing Construction Wholesale and retail trade, transport accomm. and food services J. J+K. L. M+N O, P, Q. R, S, T+U. Information and communication Financial intermediation, insurance, Real estate Business services Public Admin, education, health, social work Other services

Institutional sectors n Financial corporate sector n Non-financial corporate sector n General government sector n Household sector n NPISHs n ROW

Transaction flows in the economy

Transactions Production Value added/GDP Income distribution Use of income Stocks Saving + Capital transfers Opening balance sheet Non-financial asset Other flows Stocks Revaluation Closing balance sheet Non-financial asset Capital formation Net lending Financial Assets and liabilities Financial transactions Other volume changes Financial Assets and liabilities

Definition of assets

Definition of an asset n The assets recorded in the System are economic assets: ownership rights can be enforced § economic benefits may be derived by holding them, or using them, over time n n It is a store of value that depends upon the amounts of the economic benefits that can be derived from it by its owners.

Definition of an asset (cont) This value (discounted for inflation) does not usually remain constant but often diminish with the passage of time. Different kinds of benefits may be derived such as (a) Using assets such as machinery in production (b) Property incomes: for example, interest, dividends, rents, etc. , received by the owners of financial assets and non-produced assets; (c) Some assets may be held purely as stores of values (precious metals or stones, etc. ) without any other benefits being derived from them.

Asset boundary n n All entities which meet the definition of an asset appear on the balance sheet of the economy. All assets can be represented by a monetary value § Value represents the market’s view of the total of the benefits embodied in the asset.

Types of assets Produced § n Enter via production or imports Leave via being exhausted, sold to residents for use other than as asset, sold to non-residents Non-produced n It exists, like land sub-soil assets; or Appears over time and is valued/recognised when there is an equivalent market price n May leave via depletion or impairment n

Assets in the 1993 SNA Financial assets Non-financial assets Non-produced Produced Fixed Inventories Tangible Valuables Intangible Tangible - Land - Buildings - Structures - Machinery & Equipment - Mineral exploration - Computer software - Entertainment, literary or artistic originals - Other - Subsoil assets - Non-cult biological resources - Water resources Intangible - Patented entities - Leases and contracts - Purchased goodwill

Assets in the SNA update Financial assets Non-financial assets Non-produced Produced Fixed Buildings Structures Machinery & Equipment Inventories Valuables IP products -R&D - Mineral exploration and evaluation - Computer software and databases - Entertainment, literary or artistic originals - Other IP products Goodwill and marketing assets Contracts, leases and licenses Natural resources - Natural land - Mineral dep & energy reserves - Non-cult biological resources - Water resources - Other natural resources

Supply and Use tables

Supply and use Equations Supply = Use by product Total supply = Output + imports Total use = Intermediate consumption + Final consumption + Capital formation + Exports

Supply table Industry 1 Total 2 Imports fob Cif/ fob adj. Total product supply at basic prices Trade and transpo rt margin Import duties Taxes less subsidies on products Total supply at purcha sers’ prices 3 Product 1 156 24 180 15 195 33 2 11 241 Product 2 9 80 89 8 97 27 1 6 131 62 1 -2 61 -60 0 1 -2 2 22 0 Trade and transport and insurance 62 Cif/fob adjustment Total output at basic prices 165 104 62 330 0 352 3 17 373

Use table Intermediate consumption of industries Total economy Exports fob Household consumption expenditure 1 2 3 Product 1 25 35 13 73 28 100 Product 2 32 20 10 62 9 50 Trade and transport and insurance 0 Total use 57 55 23 135 Gross value added 108 49 39 196 Taxes less subsidies on production and imports Output at basic prices 20 165 104 62 331 Government final expenditure Gross capital formation Total use of products at purchasers’ prices 40 241 10 131 1 37 151 1 10 40 373

Role of supply and use table n Compilation tool n n n Verification Reconciliation Balancing for n Benchmark estimates n Annual national accounts in constant prices extrapolated using volume indexes or deflating using price indexes n Quarterly national accounts using price and volume indexes from short-term indicators

Source data n Annual establishment/enterprise surveys and profit and loss/balance sheets of enterprises n Government revenue and expenditure budgets n Household budget surveys n Custom data on exports and imports of goods § n Balance of payments on exports and imports of services Administrative data Business registers, employment, production, volume and price information, etc.

Data can be derived from a variety of different sources, such as administrative and business records, as well as specially conducted censuses and surveys. In practise, however, macroeconomic accounts can seldom be built up by simply aggregating the relevant micro-data. (SNA 93: 12)

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