1. Overview of System of National Accounts (SNA) I. Introduction to SNA UN Statistical Institute for Asia and the Pacific

2. System of National Accounts The national accounts are the source of information about the state and performance of the economy It conveys information about the performance of the economy in a similar way as that of the operating and financial accounts of an individual firm

3. The broad objective of national accounts To integrate and reconcile data for economic analyses and monitoring. It is central to all economic statistics developments By linking micro and macro data it provides an integration across a wide range of statistics It adds value to diverse data sets through integration The framework is not only for GDP estimates, but is also useful for other groups of statistics related to BOP, GFS (Govt. Fin Stat), financial activities and environmental accounts

4. Structure of the SNA A set of national accounts provides: A comprehensive and detailed recording of the flows and stocks of an economy in a systematic and integrated manner.

5. Flows and stocks Stocks are holdings of assets and liabilities at a given time Fixed capital, inventories, money and wealth Flows reflect the creation, transformation, exchange, transfer or loss of economic value Flows provide a “moving picture” of the economy Production aggregates, consumption expenditure, investment and saving are all flow variables

6. Flows and stocks The way flows and stocks are recorded is governed by a number of specific rules and conventions aiming at quantifying the economic entries as precise and consistent as possible. These have to do with timing, valuation, and the boundaries that distinguish economic flows and stocks from non-economic variables.

7. Compilation Compilers of the NA have to content with all sorts of conceptual and data problems The NA are compiled in accordance with the System of National Accounts (SNA) To cope with these problems a variety of conventions are used to classify, measure and exclude various items

8. What is System of National Accounts (SNA) ? A comprehensive, consistent and integrated set of macroeconomic accounts, balance sheet and tables based on a set of internationally agreed concepts, definitions, classifications and accounting rules  comprehensive: all activities, all agents covered  consistent: identical values are used to establish the consequence of a single action on all actors  integrated: all consequence of a singe action by one agent are reflected in the accounts, including wealth and balance sheets.

9. What is System of National Accounts (SNA) ? A coherent, consistent and integrated set of macroeconomic accounts, balance sheet and tables based on a set of internationally agreed concepts, definitions, classifications and accounting rules Provides a comprehensive and detailed record of the complex economic activities taking place within an economy and the interaction between different economic agents and groups of agents that takes place in markets or elsewhere

10. What is SNA ? (contd.) framework that measures stock of resources and flows of goods, services, income emanates from using these resources Meets needs of Government, Analysts, Policy makers, Decision makers

11. What is SNA ? (contd.) Helps economists to measure the level of economic development and the rate of growth, change in consumption, saving, investment, debts and wealth. Economists can forecast future growth or study impacts on the economy and its sectors of alternative government policies.

12. What is SNA ? (contd.) Integrated Framework Promotes integration of economic and related statistics in a system that is based on consistent economic and statistical concepts and methods allowing comparative analysis.

13. Resources of the Country Human resources Natural resources Produced resources Financial resources

14. Is SNA Country specific? You learn the framework of SNA and the structure which is/has to be universal, with examples, here You share the experiences, if you have any. You should try to find solutions to your country specific issues such as data and records We need to be familiar with SNA resources, concepts and standards Frequently, expert groups meet to discuss issues and resolve those.

15. Human Resources Population ( Children, Adult, Elderly) Source of labour for the economy (means of production) Capable of managing other resources Can reproduce itself Consumes/Uses resources Object of development

16. Natural Resources ( Air, Land, Water, Atmosphere, Biota, Forest, Etc.) Provide means and material inputs for production Absorb waste and residuals Reproduce itself, Mostly Provide environment for living and consumption services

17. Produced Resources.. Fixed assets (Buildings, Infrastructure, Transports, Goods in Inventory, Livestock, etc.) Result of production process Used as means or material input to production Help Economic Growth and its Acceleration

18. Financial Resources (Currency, Deposits, Bonds, Equities, etc.) Created to facilitate economic transactions Most resources have liability counterpart Used as medium of transaction Provide means for flows and use of resources

19. OPENING STOCK OF RESOURCES HumanProducedNaturalFinancial PRODUCTION Income Goods & Services Residuals Intermediate consumption Final Consumption AccumulationExports DISTRIBUTION & USE CHANGE: human CHANGE: produced, natural, financial + Other changes (volume, price) CLOSING STOCK OF RESOURCES HumanProducedNaturalFinancial

20. Format of the Integrated Framework - Presenting Stock and Flows Stock of resources (opening) Production Consumption Capital formation, Net Exports Other Changes in Volume/Price Stock of resources (closing)

21. Format of the Integrated Framework - Meaning of Stock and Flows Stock –refers to Level of Resources taken at a Point in Time Flows –refer to Production, Income, distribution and Use of Products taken as sum of what took place during a Period of Time

22. Resources Stock of Resources - Key factor to attain Society’s goal Optimization of Use of Resources - Key principle to Development Planning

23. Go to Stocks and Flows..

24. Resources (Contd.) Information on Resources required for development planning WHO (own them) ? HOW (much of these available and how used) ? WHAT (is the quality of these) ? WHERE (ownership is concentrated…Institution) ?

25. Economic Flows Actors, Actions, Activities WHO does WHAT ? By WHAT means ? For WHAT purpose ? With WHOM in exchange of WHAT ? With WHAT Changes in Stocks ?

26. Triple A’s: Actors, Actions, Activities SNA records actions of economic actors in terms of flows and stocks Within each account, flows and stocks (actions) are grouped according to economic activity It includes a full sequence of accounts (activities) for each of the five institutional sectors (actors)

27. Institutional sectors of the economy Non-financial corporations Financial corporations Government units, including social security funds NPIs serving households (NPISHs) Households

30. Production Economic activity that produce goods and services using directly/ indirectly the available Resources Classified into three broad types - Primary Production- extracting goods/ services from natural assets with or without cultivation (agriculture, fishery, forestry, mining)

31. Production (Contd.) -Secondary Production- Economic activities transforming goods into other goods- (manufacturing, construction, utilities) -Tertiary Production- Services- remaining economic activities-(Transport, Trade, Business/ Financial services, Real estate & Housing, Community services, Public administration and defense, and Other services

32. Basic concepts and variables Total supply of Gs & Ss must equal to Total uses Total Supply = Output + Imports Total Use = Intermediate consumption + Final consumption + Gross capital formation + Exports Thus : Output + Imports = Intermediate consumption + Final consumption + Gross capital formation + Exports (If the valuation is similar in both sides)

33. Gross value added We define, Gross value added = Output – Intermediate consumption = Final consumption + Gross CF + X-I Since Output is measured at producer prices and the rest at purchaser prices, we need to change the output to purchase prices.. (tax – subsides)

34. Simple example

35. Value added is GDP (Production approach) Thus, define ‘Value Added’ = GDP = Output + Taxes - Subsidies – Intermediate consumption = Final consumption + Gross CF + X-I Value added = GDP = Output +Taxes - Subsidies – Intermediate consumption (This is the GDP by Production approach!) GDP = Gross value added + Taxes-Subsidies

36. GDP by Expenditure approach Same equation can be viewed as: GDP = Final consumption + Gross CF + Exports – Imports (Expenditure approach!)

37. GDP by Income approach Production process creates incomes for owners of inputs: labour, capital, government GDP = Compensation of employees + taxes – Subsidies + Consumption of fixed capital + Gross operating surplus (Income approach!) Gross o/s includes interest payable to lenders of financial assets, or rent payable to renters of non-produced assets, such as land, sub-soil assets or patents

38. Gross domestic product (GDP) The GDP is the total value of goods and services produced within the boundaries of a country in a particular period

39. GDP methods There are three ways to calculate the gross domestic product of a country There are three ways to calculate the gross domestic product of a country Total value of production = Output - intermediate consumption Total value of production = Output - intermediate consumption Total value of final sales = Final consumption + Capital formation + Exports - Imports Total value of final sales = Final consumption + Capital formation + Exports - Imports Total income earned = Compensation + Operating surplus Total income earned = Compensation + Operating surplus

40. Gross national income (GNI) In a particular period (say one year) residents (citizens of the country) earns income in other countries and foreigners earn income in your country GNI is calculated by: –adding the income earned by residents in other countries to the GDP; and –subtracting the income earned by foreigners in your country GNI is calculated by: –adding the income earned by residents in other countries to the GDP; and –subtracting the income earned by foreigners in your country The GNI is the amount a country has available for consumption and saving.

41. Simple example

42. A+B.Agriculture, forestry and fishing C.Mining and quarrying D.Manufacturing E.Electricity, gas and water F.Construction G+H.Wholesale and retail trade, hotels and restaurants I.Transport, storage and communication J+K.Financial intermediation, insurance, real estate and business services L+M +N.Public Admin, education, health, social work O. Other community, social and personal services A+B.Agriculture, forestry and fishing C.Mining and quarrying D.Manufacturing E.Electricity, gas and water F.Construction G+H.Wholesale and retail trade, hotels and restaurants I.Transport, storage and communication J+K.Financial intermediation, insurance, real estate and business services L+M +N.Public Admin, education, health, social work O. Other community, social and personal services Standard Industrial Classification of all Economic Activities (ISIC Rev3)

43. A.Agriculture, forestry and fishing B,C,D+E.Mining and quarrying, manufacturing, electricity, gas and water of which C.Manufacturing F.Construction G,H+I.Wholesale and retail trade, transport accomm. and food services J.Information and communication J+K.Financial intermediation, insurance, L.Real estate M+NBusiness services O,P,Q.Public Admin, education, health, social work R,S,T+U. Other services A.Agriculture, forestry and fishing B,C,D+E.Mining and quarrying, manufacturing, electricity, gas and water of which C.Manufacturing F.Construction G,H+I.Wholesale and retail trade, transport accomm. and food services J.Information and communication J+K.Financial intermediation, insurance, L.Real estate M+NBusiness services O,P,Q.Public Admin, education, health, social work R,S,T+U. Other services Standard Industrial Classification of all Economic Activities (ISIC Rev4)

44. Financial corporate sector Institutional sectors ROW NPISHs Household sector General government sector Non-financial corporate sector

45. Transaction flows in the economy

46. PRODUCTION BOUNDARY OF 1993 SNA The production of all individual or collective goods or services that are supplied to units or intended to be so supplied, including the production of goods and services used up in the process of producing such goods and services; Own-account production of all goods that are retained by their producers for their own final consumption or gross capital formation;

47. PRODUCTION BOUNDARY OF 1993 SNA (Contd.) Own-account production of housing services by owner-occupiers (ownership of dwellings) and of domestic and personal services produced by employing paid domestic staff The 1993 SNA includes the production of all goods within the production boundary

48. SNA 93 Production Boundary Defines what are productive and economic activities Basic human activities, natural processes Non-productive Economic All Activities Productive Non-economic General production boundary SNA production boundary Rule: if the performance of an activity cannot be delegated to another without the same desired results/outcomes

49. SNA 93 Production Boundary ALL goods* Productive activities ALL services for sale, barter or in-kind pay Some services for own-final consumption EconomicNon-Economic Some services for own final consumption Implications for production of labour statistics Activities covered to determine economically active population

50. Own final consumption.. services Included:  own account production of housing services  domestic and personal services produced by paid domestic staff Excluded:  Cleaning, decoration, cooking caring maintenance and repair of dwelling and durables within the same household  Note: all goods for own consumption included.

51. Other Changes in Volume.. Included..(p7) (during the period) Events not connected with production/ economic processes- -Destruction of Resource --Fire, Flood, Earthquake, Typhoon, Cyclone, etc. - Appearance new Resource --New oil reserve, mineral reserve, etc.

52. Production (Contd.) -Goods and Services Production of Goods and Services SupplyUse Products Intermediate and Final Use By-products Intermediate and Final Use Residuals Recycled, Left to be absorbed back by Nature Production of Goods and Services - Generates Income to Resources

53. Production (Contd.) - Generation of Income & Use Generation of Income-Shares to Resources Resource Share Human Compensation of Employees Natural Rent Produced (Fixed Assets) Consumption of Fixed Capital Financial Operating surplus (Interest) Others Operating surplus (Profit) [ Other resources- Entrepreneurship, Technology ] Income includes Taxes Income is used for final consumption and saving

54. Distribution of Goods and Services Final Consumption- Household Final Consumption Expenditure Private Non-Profit Institution Final Cons. Exp. Government Final Consumption Expenditure Accumulation (Investment)- Fixed Capital Formation of Produced Assets Additions to stock of Inventories Improvement of Natural Assets Exports -net of Imports for gaining Financial Assets

55. Production-Consumption Cycle Production Consumption Labour Goods & Services Expenditures Incomes

56. Governm ent Households Consumption Income Govt. Expenditure Financial Market Saving Investment Rest of the World Imports Exports Circular Flow of Income and Expenditure [Showing also Leakages: Saving, Taxes, Imports; and Injections: Investment, Govt Expenditure, Exports] Taxes Firms

57. Table

58. Gross Domestic Product (GDP) – Concept – in Detail… Gross Domestic Product (GDP) at market prices represents the final result of the production activity of resident producer units of an economy Production is what is in Production Boundary

59. Gross Domestic Product (GDP) - Definition Contd. GDP of an economy is a measure in monetary terms of production of all goods and services (also called products), counted without duplication, as sum of gross value added of all resident producer units (industries) within the economic borders of country during a given period of time and taxes less subsidies on products

60. Gross Domestic Product (GDP) - Definition Contd. GDP is also equal to the sum of final uses of goods and services, less value of imports of goods and services GDP is also equal to the sum of primary incomes distributed by resident producer units

61. GDP includes All goods & services for which producers receive compensation Illegal and Concealed production Production of goods for own consumption

62. GDP includes (Contd.) Production of services by government and NPI Services of own occupied dwelling units of HHs Domestic & Personal services produced by HHs for own consumption by paid domestic help

63. GDP excludes Production of Personal and domestic services by unpaid Household member for own use Social activities, Cultural activities and Unpaid Volunteers in NPI or Government Do-it-yourself decoration, Maintenance and Small Repairs to Durables and Dwellings by Households

64. Gross Value Added (GVA) For obtaining Gross Value Added (GVA) economy is divided into mutually exclusive sectors (industries) Unduplicated output (GDP) is obtained by taking only the GVA in each of the sectors instead of output which is always duplicated  eg: flour mill and a bakery..

65. Gross Value Added (GVA) (Contd.) GVA at basic price = Value of Output at basic price – Value of material inputs at purchaser’s price GVA avoids duplication, gives GDP when added over all sectors of the economy including taxes less subsidies on products

66. Basic / producer prices Basic price: amount received by producer from purchaser for a unit of output, excluding taxes on products Producer price: basic price + taxes on output invoiced to purchaser less subsidies received by producer from government Purchasers’ price: producer price + trade, transport margins on products, which are not separately invoiced

67. Valuation of NA aggregates Gs & Ss may be valued differently, but should satisfy three principles: Uniformity in the elements when they have to be aggregated Avoidance of double counting Purchaser's price = basic price + trade margins + taxes less subsidies on products

70. GVA at basic / producer prices GVA at basic price = Output at basic price – intermediate consumption at purchaser’s price GVA at producer price = Output at producer price – intermediate consumption at purchaser’s price

71. GVA at basic / producer prices and GDP GDP which is at market price can be obtained as: GDP = GVA at basic prices + taxes less subsidies on products GDP = GVA at producer prices + import duties* *since output at producer price include taxes on products only for domestic output and does not include import duties