The new ESA 2010 Improving national accounts data François Lequiller Director national accounts Eurostat

Why and when a new ESA? ESA:European System of Accounts ESA 2010 will replace ESA 1995 in September 2014 and will bring macroeconomic statistics in line with new economic environment and additional user needs. It is not a revolution, but a necessary adaptation. - All Member States will transmit to Eurostat ESA 2010 data just before 1 October Eurostat public database will be updated on 1 October Eurostat will publish EU aggregates mid-October with a note illustrating all the changes (with quantitative information) Worldwide change: ESA 2010 follows 2008 SNA 2008 SNA (System of National Accounts) already implemented in USA, Australia and Canada.

Implementing ESA 2010: A particularly important process in Europe -ESA is the essential basis of all macro-economic statistics for all users. Specific to Europe, ESA is framework for : EU budget: calculation of contributions to EU budget Fiscal policy: ratios of deficit and debt EU subsidies: regional GDP Macroeconomic Imbalance Procedure: Macroeconomic and financial indicators -ESA 2010 is a EU Regulation. The compulsory implementation of ESA 2010 ensures comparable macroeconomic data. -ESA 1995  ESA 2010 = 44 improvements

Towards ESA 2010: Main improvements Capitalisation of Research & Development Capitalisation of military "weapon systems" Change in treatment of imports/exports of "goods sent abroad for processing" Supplementary information on pension entitlements Better measure of output of non-life insurance Revised and extended dissemination programme

Capitalisation of R&D In a modern and digitalised economy, investment in R&D is more important than in traditional productive assets ESA 95 treated R&D expenditures as "consumed" in the period ESA 2010 "capitalises" these expenditures Bold change, compared to standard business accounting principles, but based on good sources. Leads to better analytical capacity of balance sheets

Capitalisation of R&D ESA 1995 underestimated: Stock of assets GDP (because expenditure in R&D come in deduction of total output) Operating profits (idem) Under ESA 2010, R&D is treated as investment: Gross domestic product (GDP) increases in level, on average, by 1.9% in Europe (2.5% in USA) Diversity between Member States: depending on level of R&D Ratios expressed in terms of GDP will slightly decrease (public debt) Impact on GDP trend (growth rate) only marginal

Other main changes Capitalisation of weapon systems: Increase in GDP level on average of 0.1% Goods sent abroad for processing: In the light of globalisation, an export of goods is recorded only when the ownership changes. Countries export "processing services" and not goods. Will decrease slightly the levels of imports/exports Does not change overall current account balance No impact on GDP, but difference with merchandise trade statistics which focusses on the physical movement of goods.

Other main changes Pension schemes Pension liabilities of government sponsored schemes remain not recognised in the ESA 2010 core accounts. USA, Canada, Australia recognise these assets of households. International comparability is achieved by a new supplementary pension table covering all accrued-to-date pension entitlements (funded and unfunded). ESA 2010 changes treatment of lump sum payments received by government in exchange of taking over of pension liabilities =>big impact on government deficit but limited to few Member States (e.g. Hungary, Portugal) Insurance output Impact of catastrophes is smoothed in the measure of contribution to GDP

Extended dissemination programme More complete balance sheet data Enlarged set of asset types for capital formation More detailed breakdowns of financial accounts New set of data on potential obligations of government (debt of public corporations, guarantees, non-performing loans, Public Private Partnerships) Supplementary table on pension schemes Improved timeliness, more quarterly variables, seasonally adjusted More data focussing households

Provisional estimate of impact of methodological changes on GDP (statistical changes only in October) * Some MSs have not yet estimates Percentage of GDP increaseNumber of countriesCountries 0 to +1% 5 LV, LT, HU, PL, RO +1 to +2% 10 CZ, EE, IE, ES, IT, LU, MT,PT, SI, SK +2 to +3% 4 BE, DK, DE, FR +3 to +4% 3 AT, NL, UK +4 to +5% 2 FI, SE +2.4% 24 EU average +3.0% USA

Road map to ESA Dedicated web site already available -- Manual of changes between ESA 95 and ESA Conference " The accounts of society: National Accounts at the Service of Economic and Monetary Policy": June 2014, in Luxembourg -- 1 October 2014: all Member States transmit and publish main aggregates in ESA Mid October 2014: first Euro aggregates published by Eurostat in ESA

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