1. Central Statistics Office Institutional Sector Accounts Non-Financial Mary Brew Integration Division National Accounts UCC 16 th March 2011

2. Recap l Session 1 – Key Social Indicators l Session 2 – Key Business Indicators l Session 3 – Balance of Payments – Ireland’s globalised economy Quarterly National Accounts – Headline indicators of total economic activity l Session 4 – Measures other than GDP

3. The Stiglitz, Sen, Fitoussi Commission Report (2009) l The report was written by economists and social scientists l To Political Leaders, Policy Makers, The Academic Community, Statisticians and Civil Society Organisations l To identify the limits of GDP as an indicator of economic performance & social progress l To recognise other relevant measures e.g. household income, consumption and wealth

4. European Sector Accounts l Outcome of collaboration between Eurostat, the European Central Bank, National Statistical Institutes and National Central Banks l Output for Euro Area – 16 countries and European Union – 27 countries l Detailed economic development by institutional sector at current prices l Key ratios – e.g. household saving rate

5. Institutional Sector Accounts 3 approaches to measuring National Income l Output – Value added by each producer Σ output - Σ intermediate consumption + net product taxes l Income – All income generated Σ COE + GOS/GMI + net taxes l Expenditure – All spending on final demand C + I + G + X - M

6. Three Measures of GDP Three measures of GDP 2009 (€m) Value Added Income Expenditure Output348,545COE73,224 Consumption (including G)112,049 + Taxes on products16,234GOS/GMI70,620Investment23,195 - Subsidies on products808+ Taxes18,372+ Exports144,782 - Intermediate Consumption 204,325- Subs2,571- Imports120,380 GDP159,646

7. Institutional Sector Accounts l Vertical analysis Provides by institutional sector a systematic description of the different stages of the economic process l Horizontal analysis Institutional sectors are distinguished in terms of their principal economic behaviour

8. Generation of Income Account ResourcesS.1S.11S.12S.13S.14/S.15S.1NS.2 B.1gGross domestic product 159,64675,09814,06321,95633,85014,678 D.3Subsidies, received 2,571166001597808 D.31- Subs on products 808 D.39- Other subs on production 1,763166001597 R211Total resources 162,21675,26514,06321,95635,44615,486 Uses D.1COE 73,22435,0126,00719,81712,387 405 D.2Taxes paid 18,372156397047816,234 D.21- Taxes on products 16,234 D.29 - Other taxes on production 2,1381563970478 B.2gGOS 58,37738,6897,9592,13910,338-748 B.3gMixed income 12,243 U211Total uses 162,21675,26514,06321,95635,44615,486

9. Institutional Sectors (Horizontal Analysis) l Mutually exclusive institutional sectors that make up the total economy »Non-financial corporations »Financial corporations »General Government »Households »Non-profit institutions serving households l Rest of World

10. Sequence of Accounts (Vertical Analysis) l Institutional Sector Accounts are built around a sequence of inter-connected accounts »current accounts –Production, generation, allocation, distribution and use of income »accumulation accounts –Financial and non-financial accumulation »balance sheets l Linked sequentially »Balancing item from one account provides the starting point for the next account

11. Production - GDP Generation of Income - GOS Allocation of Primary Income - GNI Secondary Distribution of Income - GDI Use of Disposable Income - Saving Financial Balance sheet Sector Accounts Capital Accounts – Net Lending/Borrowing Financial Accounts

12. Non-Financial Accounts l Current accounts distinguish between: resources – transactions that add to the amount of economic value of a sector uses – transactions that reduce the amount of economic value of a sector

13. Household Sector €-15,797, Social Contributions D 61

14. Current Accounts l Production account measures the output of goods and services and the value of goods and services used in making them Output – intermediate consumption = GVA GVA + (taxes – subsidies on products)=GDP GDP – consumption of fixed capital = NDP Balancing item = Net domestic product

15. GVA: Output – Intermediate Consumption

16. Current Accounts l Distribution and use of income accounts »Generation of income account – How is net domestic product distributed to the factors of production: Compensation of employees (labour) Taxes less subsidies on production (government) Balancing item: net operating surplus/mixed income

17. Profit Share of Non-Financial Corporations

18. Current Accounts »Allocation of primary income account – primary income is received from direct participation in the production process and from ownership of an asset put at the disposal of another Balancing item – net national income ( the balance of primary income) Memorandum – entrepreneurial income account – Financial and non-financial corporations – balancing item corresponds to the concept of current profit as used for business accounting.

19. Current Accounts l Secondary distribution of income account – shows how the balance of primary income is redistributed through: »Current taxes »Social contributions and benefits and »Other current transfers Balancing item – net disposable income l Use of disposable income account – how disposable income is divided between final consumption expenditure and saving Balancing item - saving

20. Annual change in Household Net Disposable income and Household Final Consumption

21. Household Saving Ratio

22. Accumulation Accounts l Accumulation accounts record the changes in the assets and liabilities of sectors and the change in their net worth l Capital account »Change in net worth due to saving and capital transfers account Balancing item – changes in net worth due to saving and capital transfers »Acquisitions of non-financial assets account Balancing item – net lending or borrowing l Financial account

23. Investment Rate of Non- Financial Corporations

24. Investment Rate of Households

25. Net Lending/Borrowing

26. Household Net Lending/Borrowing

27. Rest of World l External account of goods and services balancing item – external balance of goods and services (imports – exports) l External account of primary incomes and current transfers balancing item – current external balance (corresponds to saving by the institutional sectors) l Capital account balancing item – net lending or borrowing (equal, but with the opposite sign, to net lending or borrowing of the resident institutional sectors)

28. Analytical Potential of Sector Accounts The Economy l Gross Value Added l Net Lending/Borrowing Households l Household Net Disposable Income and Final Consumption l Household Saving Rate - Calculated in % as: gross saving / gross disposable income (D8* is included)

29. Analytical Potential of Sector Accounts l Investment Rate of Households - Calculated in % as: gross fixed capital formation / gross disposable income (D8* is included l Household Net Lending/Borrowing Non-Financial Corporations l Profit Share of Non-Financial Corporations - Calculated in % as: gross operating surplus / gross value added of non-financial corporations l Investment Rate of Non-Financial Corporations - Calculated in % as: gross fixed capital formation / gross value added of non-financial corporations

30. Analytical Potential of Sector Accounts Government l Government Income l Government Expenditure l Government Savings and Net Lending/Borrowing

31. Government Income

32. Government Expenditure

33. Government Saving and Net Lending/Borrowing

34. Production - GDP Generation of Income - GOS Allocation of Primary Income - GNI Secondary Distribution of Income - GDI Use of Disposable Income - Saving Financial Balance sheet Institutional Sector Accounts Capital Accounts – Net Lending/Borrowing Financial Accounts

35. Central Statistics Office Thank You