Support for the Alignment of Albanian Statistics with EU standards Improvement of Annual GDP estimation by production side and the new NOE estimation Elirjeta Pepaj 20 February 2014

Content: 1. Background of IPA Activity 1: GDP by production approach 2.1. New data sources and Improvement of existing sources 2.2. Development of new methodologies of GDP 3. Activity 4: Exhaustivenness 3.1. Eurostat Tabular Approach 3.2. Method and sources by type of exhaustivenness 3.3. Labour Input method 3.4. Franz method 4. Future work

1. Background of IPA Project General Objectives: GDP (P)-module 1)to identify and to improve new and existing statistical data sources and methodology for more reliable Annual National Accounts estimates (A.1) 2)to improve the method and coverage of the non-observed economy (NOE) in order to ensure exhaustiveness (A.4)

2. Activity 1 (A.1) GDP by production approach (1/4) Development of new surveys and use of new data sources :  Design and inclusion of “Statistical Annex” to the annual financial statements of institutional units  better estimation of Output (P1) and Intermediate Consumption (P2).  Two new surveys : 1. For commercial banks 2. For insurance activities  Use of Census of Non-Agriculture Enterprises 2010 data  updated Business Register  improved estimations by giving a better picture of whole economy and reducing the number of enterprises without information.

2. Activity 1 (A.1) GDP by production approach (2/4) Improvements of existing data sources:  Improvement of the Structural Business Survey based on the NA requirements, by:  including detail information necessary for the estimation of production (P1) and intermediate consumption (P2)  incorporating additional questions on employment that allow to make estimation and analyses of employment in Full Time Equivalent (FTE) unit;  covering of activities of private Health & Education and estimating them according to ESA 95 concepts;

2. Activity 1 (A.1) GDP by production approach (3/4) Improvements on statistical techniques:  Detail classification of the size of Small enterprises by employment and turnover  Implementation of new techniques of partial imputations and grossing up procedures based on output per employment  Quality improvements of the estimations based on deeper analyses of ratios:  Output / Intermediate Consumption  Value Added / Employees (Productivity)

2. Activity 1 (A.1) GDP by production approach (4/4) Improvements on methodology side:  Implementation of new method of estimation of financial activities (S12);  Estimation of FISIM in line with the requirements of Council regulation (EC) 448/1998 ;  Compilation of estimations in more detail level of NACE Rev 1.1 classification, passing from A25 branches in A60.  Improvement of NOE estimates by applying new methods and using new sources.

2. Activity 4 (A.4) NON OBSERVED ECONOMY (NOE) Identification of all types of NOE:  based on EUROSTAT Tabular Approach framework where was determined which types are possible to estimate in order to ensure better exhaustiveness; Exhaustiveness adjustments by output GDP are done :  By type  By institutional sectors  By activities Eurostat Tabular Approach is important because:  Provides a comprehensive and systematic assessment to ensure exhaustiveness of NA;  Facilitates cross-country comparisons of adjustments and methods to provide similar level of coverage of NA.

EUROSTAT TABULAR APPROACH (N1-N7) Not registered Producer deliberately not registering Producer not register (illegal activity) Producer not required to register Not Surveyed Misreporting Legal Producers not surveyed Registered entrepreneurs not surveyed Other Misreporting by Producers Other statistical deficiencies N1 N2N3 N4N5N6N7

3. Activity 4. Data sources and methods of NOE Type of NOE DescriptionMethodSources N1Not register producerLabour inputSBS, LFS, BR, administrative files N2Illegal actvitiesQuantity per priceUndergoing IPA 2011 project N3Production of HH for own final use (agriculture and own construction) Expert and supply based method Agriculture data, HBS and SBS N4Legal persons Not surveyedAnalyses and comparisons SBS, BR, NA N5Enterpreneures Not surveyed Analyses and comparisons SBS, BR, NA N6UnderreportingFranz and LIMSBS, LFS, BR N7Tipsa fixed % of the turnover HBS, NA

3. Activity 4. Labour Input Method (LIM)  Incorporation of Labour Force Survey (LFS) data, as a new and appropriate source of information on employment in Albania, for the implementation of Labour Input Method to estimate N1 and N6 types of NOE;  Application of Labour Input Method for all branches, including private Health & Education as well (except Agriculture, Financial and Public Administration);

3. Activity 4. Labour Input Method (LIM) The LIM is bases on the following steps:  obtain estimates of the supply of labour input to GDP, for selected economic activity and size of enterprise, from a household labour force survey and/or other demographic sources;  obtain estimates of output per unit of labour input and value added per unit of labour input for the same activity and size breakdown from regular or special purpose enterprise survey;  multiply the labour input estimates by the per unit ratios to get output and value added for the activity and size categories

3. Activity 4: Methodological scheme of LIM Adjustment of sources For definitions, classifications and populations target Employment estimates by employees and selfemployed, From stock to annual flows, From persons to Jobs, Other adjustmentse) Integration of sources Demand side : Enterprises surveys and administrative data Supply side: Household surveys and demografic sources Comparison of labour input demand and supply side of employment (unregistered employment) Multiply by Value Added/Unit Labour Corrected for underreporting

3. Activity 4 Types N3, N4 and N5  Estimation for the first time of Own construction, N3 based on Households Budget Survey (HBS) data;  Analysis of differences between NA estimates and SBS data for the observed components: N4+N5;  the number of legal person or registered entrepreneurship that are included NA estimates but are not surveyed:  estimates done for conceptual adjustments or consistency check

3. Activity 4 Franz method Application for the first time of Franz Method for Underreporting of Production (N6): The method is applied to SMS enterprises with more than one year life of activity X - per-capita of value added resulted from the survey on enterprises Control of coherencies between the income of the self-employed worker and compensation of employees Per capita values corrected for underreporting of output is based on the hypothesis that the income of the self-employed worker of an enterprise should be equal at least to the average compensation of employees X’ – revaluated per-capita of production and value added When the level of income of a self-employed workers is less then the level of compensations of employees the income is re-valuated and with the same amount also the production and value added is adjusted X’ – revaluated per-capita of production and value added When the level of income of a self-employed workers is less then the level of compensations of employees the income is re-valuated and with the same amount also the production and value added is adjusted

3. Activity 4 (A.4)  After analyzing the methodologies/practices used in other countries and the possibilities to adjust them to the specific conditions of Albanian economy  estimation of statistical deficiencies, N7 in:  Trade;  Hotels and restaurants;  Road passenger transport;  Other personal services; **The estimates are performed using an expert assessment of the percentage of tips based of the ratio used in neighbour countries and adopted for Albania.

Exhaustiveness adjustments by Institutional Sectors %

4. Further work/the way forward  Using of Census of Population 2011 data  Use of back-casted LFS and HBS based on Population census results  Measuring of Illegal activities (ongoing IPA 2011)  Estimation of Onwer Ocupied Dwelling Services (ongoing IPA 2011, IMF)  Use of SUT framework for NOE  Improvement energy estimates (ongoing IMF)  Constant price estimates (IPA 2009 and IMF)  Introduction of NACE Rev 2 (ongoing)  Implementation of new ESA 2010 (ongoing IPA 2011, IMF)  All of the above will impact GDP estimates and we consider this to be good international practice to publish all recent revisions in coordinated way in order not to confuse and mislead the users.

Thank You for Your Attention! Thank You for Your Attention!