Overview of the 2008 SNA and the GFSM Update IMF Statistics Department Reproductions of this material or any parts of it should refer to the IMF Statistics Department as the source

IMF Statistics Department Definition, the System of National Accounts (SNA) is: An agreed set of international standards to measure economic activity, which implies strict accounting conventions based on economic principles. SNA comprises comprehensive, consistent, and integrated set of accounts that record economic activities within given period and the levels of an economy’s assets and liabilities at particular points of time. What is the SNA? 2

IMF Statistics Department Comprehensive - all designated activities, and their consequences for all agents in the economy, are covered; Consistent - the same values are used for recording all sides of a single action; Integrated - all the consequences of a single action are captured in the accounts and balance sheets, in such a way that together they constitute a closed system: Opening balance sheet + Transactions + Changes due to revaluation + Other changes in the volume of assets = Closing balance sheet SNA: General Principles 3

IMF Statistics Department SNA: A Coordinating Framework for Economic Statistics and Analysis Observation of Economic Phenomena Basic Economic Statistics Manufacturing, Construction, Price statistics etc. Balance of payments, Money & banking, and Government financial statistics The System of National Accounts Production, Income, Consumption, Capital formation, International trade, IO-analysis, Employment, Integrated sector accounts, ROW/BOP, Financial transactions, Balance sheets, Flow of funds Economic Model Building, Developments and Testing of Economic Theories Macro and Meso Economic Analysis Political and Private Decision Making 4

IMF Statistics Department An institutional unit is an economic unit that is: Capable of owning goods and assets Incurring liabilities Engaging in economic activities and transactions with other units in its own right = legal responsibility. Institutional Unit and Sectors 5

IMF Statistics Department Institutional units may be: Legal entities Corporations Non-profit institutions Government units Households Institutional unit are grouped together to form institutional sectors, on the basis of their principal functions, behaviour and/or objectives = five institutional sectors Institutional Unit and Sectors 6

IMF Statistics Department Institutional Unit and Sectors Non-financial corporations: production of market goods and non- financial services Financial corporations: production of financial services General Government: economic regulation, political responsibilities, production of services for individual or collective consumption (non- market basis), redistribution of income and wealth Households: supply of labour, final consumption, production of goods and services (unincorporated enterprises) Non-Profit Institutions Serving Households: production of non- market services for households or the community at large 7

IMF Statistics Department Who ? Institutional units grouped into sectors, establishments Does what? Three economic activities (production, consumption, accumulation) Transactions/other flows (during period of time) Concerning what? Products Assets/Liabilities With whom? Counterparts For what purpose? Function/purpose When? Time of recording How to measure? Valuation, accounts in volume terms How does this affect stocks? Non-financial assets, financial assets/liabilities (at a point in time) Are recorded on the balance sheets Basic Information to be Addressed in Accounts 8

IMF Statistics Department Diagram: Integrated Accounts 9

IMF Statistics Department 2008 SNA: an update of the 1993 SNA No fundamental changes Same structure of accounts Same accounting rules Few changes in some concepts However, some of the changes affect the level of GDP 2008 SNA and 1993 SNA 10

IMF Statistics Department Need for closer consistency with other statistical manuals. Evolution of economic environment. Development of improved methods as result of recent research. Further elaboration on prominent issues and need of clarifications. Reasons for an Update of SNA 11

IMF Statistics Department Assets The financial sector Globalization General government and public sector Informal sector Main Changes Introduced in 2008 Update Main Changes Introduced in 2008 Update 12

IMF Statistics Department Assets New classification Expenditures on research are now treated as capital formation and not as intermediate consumption Weapons systems are classified as capital formation The concept of capital services is introduced Refinement of the treatment of financial instruments Main Changes Introduced in 2008 Update Main Changes Introduced in 2008 Update 13

IMF Statistics Department The financial sector More detailed classification of the financial sector Measurement of non-life insurance services Calculation of FISIM Recording of pension entitlements Main Changes Introduced in 2008 Update 14

IMF Statistics Department Globalization The principle of changes in ownership is made universal: Goods sent abroad for processing Merchanting Special purpose units Main changes introduced in 2008 update Main changes introduced in 2008 update 15

IMF Statistics Department The general government and public sectors Boundary between private /public/government sectors clarified Treatment of public-private partnerships Treatment of restructuring agencies Transactions between general government and public corporations Treatment of taxes and permits Treatment of loan guarantees Main Changes Introduced in 2008 Update 16

IMF Statistics Department Boundary between private /public /government sectors clarified Powers, motivation and functions of government are different from those of other sectors Guidance for the distinction between general government, private, and public corporations (decision tree) Main Changes Introduced in 2008 Update 17 General govern- ment sector Nonfinancial corporations Financial corporations House- holds NPISHs Public Private

IMF Statistics Department Government Finance Division, IMF Statistics Department 18 The Public Sector Public Sector General government Central government Central government State governments State governments Public Corporations Local governments Local governments Financial Nonfinancial Central bank Public deposit-taking corporations except the central bank Public deposit-taking corporations except the central bank Other public financial corporations Other public financial corporations

IMF Statistics Department Government Finance Division, IMF Statistics Department 19 A Decision Tree Resident entity Institutional unit? Determine institutional unit that controls it Controlled by government? Public entity No Domestic private unit No Yes

IMF Statistics Department Government Finance Division, IMF Statistics Department 20 A Decision Tree Public entity Sell all or most of its output at economically significant prices? Public corporation Can a separate market producer be identified? General government No Yes Yes – possibly a quasi-corporation No

IMF Statistics Department Government Finance Division, IMF Statistics Department 21 A Decision Tree Public corporation Financial services? Public financial corporation Public nonfinancial corporation No Yes

IMF Statistics Department Treatment of public-private partnerships PPPs are long-term contracts between two units A private (or public) unit acquires or builds an asset, operates it for period and then hands it over to a unit in the public sector Guidance to determine whether the private or public partner is the economic owner of the asset Main Changes Introduced in 2008 Update 22

IMF Statistics Department Transactions between general government and public corporation Exceptional payments from public corporations should be recorded as withdrawals from equity (vs. dividends) Exceptional payments from government to public quasi- corporations should be recorded as capital transfers (vs. additions to equity) Main Changes Introduced in 2008 Update 23

IMF Statistics Department Treatment of taxes Taxes are recorded on an accrual basis (confirmed) BUT: care must be taken NOT include taxes unlikely ever to be collected Tax credits are recorded on a gross basis (≠ GFSM2001 and Revenue Statistics…) Taxes on holding gains = current taxes on income and wealth (even though holding gains are not an income) Main Changes Introduced in 2008 Update 24

IMF Statistics Department Treatment of permits Permits issued by governments: If does not involve an government owned asset = tax Notwithstanding, if the license is transferable to a third party = must be classified as an asset (“contracts, leases and licenses”) When the license is to make use of a natural resource = asset or rent Main Changes Introduced in 2008 Update 25

IMF Statistics Department GDP: Production Approach vs. Expenditure Approach GDP = ΣVA + Taxes less subsidies on products GDP = Final consumption + Gross Capital Formation + (Exportations – Importations) 26 IMF Statistics Department

GDPe: Government Final Consumption Expenditure Consumption expenditure = Value of all types of output of general government Less the value of output for own account capital formation Less the value of sales of goods and services At economically insignificant prices At economically non significant prices Plus the value of goods and services purchased from market producers for delivery to households free or at economically insignificant prices 27 IMF Statistics Department

GDPe: Government Final Consumption Expenditure Government consumption expenditure is classified into: Individual consumption expenditure: expenditure whose recipient are individual persons or individual households (health services, education services, social security and welfare, sports, recreation, culture, etc.) Collective consumption expenditure: expenditure for general population -public goods- (public administration, defence, law and order-police, statistics, economic development, R&D, etc.) 28 IMF Statistics Department

GDPe: Capital Formation Gross fixed capital formation (GFCF) Changes in inventories Acquisitions less disposals of valuables GFCF is measured by the total value of a producer’s acquisitions, less disposals, of fixed assets during the accounting period plus certain specified expenditure on services that adds to the value of non-produced assets 29 IMF Statistics Department

GDPe: Fixed Assets Fixed assets are produced assets that are used repeatedly or continuously in production processes for more than one year The distinguishing feature of a fixed asset is not that it is durable in some physical sense, but that it may be used repeatedly or continuously in production over a long period of time, which is taken to be more than one year. 30 IMF Statistics Department

GDPe: Fixed Assets Fixed assets can be bought and sold When assets are bought and sold there are often associated costs – costs of ownership transfer Professional charges Trade and transport costs Installation (and de-installation) costs Taxes Terminal costs 31 IMF Statistics Department

GDPe: Costs of Ownership Transfer Treated as fixed assets Benefits from using the assets have to cover this cost as well as cost of the asset Are subject to consumption of fixed capital For fixed assets, include costs in value of the asset 32 IMF Statistics Department

Fixed Assets by Type of Asset Dwellings Other buildings and structures Buildings other than dwellings Other structures Land improvements Machinery and equipment Transport equipment ICT equipment Other machinery and equipment 33 IMF Statistics Department

Fixed Assets by Type of Asset (cont.) Weapons systems Cultivated biological resources Animal resources yielding repeat products Tree, crop and plant resources yielding repeat products Cost of ownership transfer on non-produced assets Intellectual property products 34 IMF Statistics Department

35 OPENING BALANCE SHEET NET WORTH Nonfinancial Assets Financial Assets Liabilities Changes in Net Worth F L O W S CLOSING BALANCE SHEET NET WORTH Nonfinancial Assets Financial Assets Liabilities TRANSACTIONS Revenue Expense = NET OPERATING BALANCE minus Nonfinancial Assets = NET LENDING / BORROWING minus Liabilities Financial Assets cash other financial assets minus OTHER ECONOMIC FLOWSHolding Gains and Losses Other Changes in Volume of Assets Nonfinancial Assets Financial Assets Liabilities Nonfinancial Assets Financial Assets Liabilities CHANGE IN NET WORTH (HG) CHANGE IN NET WORTH (OVC)STOCKSSTOCKS