Statistics for policy use Seminar on Developing a programme for the implementation of the 2008 SNA and supporting statistics Kampala, Uganda 9 December 2013 United Nations Statistics Division

Outline of Presentation Introduction System of National Accounts Economic indicators approach to macroeconomic analysis 2

Macroeconomic framework To establish an enabling macroeconomic policy framework for equitable and sustainable development Requires a clear understanding of the underlying factors that drive national income growth, including: growth in capital accumulation, changes in employment rate, labour and capital productivity, changes in the terms of trade and linkages between macroeconomic policies and industrial and sectoral policies. 3

The need to be informed This gives rise to the need, not only to monitor progress but also to evaluate whether or not goals are being achieved. To obtain this overview of the economic processes data need to be organised in a framework that integrates and reconciles the data. 4

The need to be informed Requires data of sufficient scope, detail and timeliness to analyse: the external and internal economic and financial vulnerabilities, the interconnectedness of the global production and the global financial system; the causes of changes in economic growth and employment patterns; and to inform about the trade-offs between fiscal, monetary and debt reform and initiatives to increase growth, employment and equity. 5

System of National Accounts SNA describes a coherent, consistent and integrated set of macroeconomic accounts that provides an overview of economic processes, recording how: production is distributed among consumers, businesses, government and foreign nations. income originating in production, modified by taxes and transfers, flows to these groups and they allocate these flows to consumption, saving and investment. The latest version of the SNA is the 2008 SNA http://unstats.un.org/unsd/nationalaccount/docs/SNA2008.pdf

System of National Accounts The SNA embodies basic distinctions as required by economic theory such as: production (supply) and use (demand) with prices factors of production such as labour, capital, technology transactions such as income, consumption, investment, exports, imports, transfers, financial assets and liabilities .. balance sheets with positions of assets and liabilities (institutional) sectors such as household sector, corporate sector, monetary sector, government sector, external sector 7

System of National Accounts The national accounts support macroeconomic and sectoral policies including those related to employment, inflation, international trade, and finance growth and productivity of the economy Consequently, the national accounts provide an overarching framework for macroeconomic statistics to facilitate economic analysis and policy formulation

SNA and Intermediate Accounts for Policy Analysis System of national accounts ECONOMIC ISSUES ECONOMIC THEORY Policies and perspectives Concepts and definitions Indicators Accounts Basic data and statistics 9

Economic indicators approach to macroeconomic analysis A set of national accounts data is generally too large and conceptually too complex for users to handle in analysis. Users require that the data set be summarized into a smaller set of indicators that could be used to assess economic conditions and development of a country. Indicator analysis – generally indicator ratios are used. The reason for using ratios between data rather than the data themselves is that data generally provide little information, unless they are related to other data. 10

Economic indicators approach to macroeconomic analysis Example: GDP figure becomes only meaningful if its growth over time is analysed, a per capita figure is derived that makes it possible to compare the data between countries, or a percentage breakdown by expenditures or activities is presented. Similarly, data about the level of imports are not very informative unless they are related to exports or to domestic output, or a breakdown by products is shown. 11

Economic indicators approach to macroeconomic analysis Aggregates, such as GDP and GDP per capita, are widely used as summary indicators of economic activity and welfare. While useful in their own right, they are not the most suitable measures of people’s material conditions. The GDP as the single most important measure of economic performance and social progress does not reflect ordinary people’s perceptions of their economic conditions. The GDP also don’t reflect the link between environmental sustainability and economy performance. 12

Economic indicators approach to macroeconomic analysis National accounts provides valuable information on household material conditions at the macro level, such as: measures of household disposable income; social transfers in kind; consumption expenditure; investment; and assets and liabilities.

Economic indicators approach to macroeconomic analysis By combining these macro level aggregates with micro sources (surveys, administrative records, and censuses), it would be possible to derive measures across household groups of their distribution of income, consumption and wealth

Economic indicators approach to macroeconomic analysis Indicator ratios are roughly grouped by types that describe economic conditions and development of the economy and/or policies aimed at influencing developments First - describe the total economy and its relations with the ROW aggregates per capita and per worker, prices and BOP Second - describing production by industries and sectors Production, behaviour and participation of corporations in the economy Third - elements of fiscal policies and the impact of those on other sectors behaviour and participation of Government in the economy, taxes 15

Economic indicators approach to macroeconomic analysis By linking the indicators to macro-economic framework, it would be possible to identify not only the issues but also the underlying variables that could measure the impact of policies addressing the issues. As a macro accounts framework is generally used to address policy issues within a country, the development of indicators based thereon would stimulate the use of those indicators by national Governments in their assessment of national conditions and developments, in addition to the present use of indicators by international agencies. 16

Advantages of economic indicators approach Simple and understandable economic constructs that summarize the development of the economy and the economic and financial vulnerabilities over time. Economic indicators within a balanced system of national accounts are mutually consistent. Economic indicators use the real and financial interconnectedness within sectors, between sectors and their counterparties in the rest of the world. Economic indicator analysis improve the use of national accounts and its quality and reveal data gaps 17 1993 SNA and policy use 17

Projections of future development Links between statistics, macro accounts, indicators, projections and policies [c] [h] [g] Projections of future development Selection and compilation of indicators measuring past trends Statistics and statistical development Macro accounts design and compilation [a] [f] [e] [b] Policy analysis and formulations [d] 18 1993 SNA and policy use 18

Links between statistics, macro accounts, indicators, projections and policies Indicators and macro accounts play a central role in statistical development and policy formulation. Policy formulation could be based on the use of indicators measuring past and present trends [a] May also take into account future developments that are based on alternative values of the indicators in the future [b]. The use of indicators in projections is reflected in a direct link with the indicators measuring past trends [c]. 19 1993 SNA and policy use 19

Links between statistics, macro accounts, indicators, projections and policies In order to define statistical development that would support policy formulation, links are needed to translate policy formulation into indicators [d]. indicators into the design and compilation of macro accounts [e] and macro accounts into statistical development [f]. The derivation of values of indicators are represented by the reverse links between statistics and the compilation of macro accounts [g], and between the macro accounts data and the derivation of indicator values [h]. 20 1993 SNA and policy use 20

Scope of Macro-economic Analysis by Milestones and Minimum Required Data Set (MRDS) Milestone 1.GDP by Industry and Expenditure in current and volumes Growth analysis Milestone 2. GNI of Total Economy and Balance of Payments (current, capital and financial accounts) and GFS transaction accounts Relations with the rest of the world (BoP) analysis Milestone 3. Production and generation of income accounts for institutional sectors and for GG income distribution accs (including IIP for BoP and GFS transactions and stock in assets and liabilities) Productivity analysis and fiscal analysis Milestone 4. Production, generation, distribution, redistribution and use of income accounts and capital accounts for all institutional sectors (up to net lending) Income distribution analysis --------------- Minimum required macroeconomic data set, annual institutional sector accounts up to net lending and quarterly GDP and quarterly BoP 21

Scope of Macro-economic Analysis by Milestones and Minimum Required Data Set (MRDS) Milestone 5. Production, income and use accounts, capital accounts and financial accounts for institutional sectors Growth analysis, BOP analysis, productivity analysis, fiscal, income distribution analysis and investment- financing analysis Milestone 6.  All transaction and flows accounts plus balance sheets Financing-debt analysis (Flow of funds) and vulnerability analysis (currency mismatches, maturity mismatches (roll-over of debt), capital structure (equity vs debt), solvency (assets over liabilities) 22

Reference http://unstats.un.org/unsd/publication/SeriesF/SeriesF_81E.pdf 23

http://unstats.un.org/unsd/nationalaccount/default.asp SNA@un.org

Point for discussion Does the present scope, detail and quality of National Accounts of your country meet present policy demands in an interconnected economic and financial domestic and global economy? 25

Thank You 26 26