Introduction to the SNA

1. Introduction to the SNA SEEAW Training course November 2006 UN STATISTICS DIVISION Economic Statistics Branch National Accounts Section

2. Introduction SNA concepts Definition of assets Supply and use tables Conclusion

3. SNA concepts

4. The national accounts are the source of information about the state and performance of the economy System of National Accounts • 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

5. 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, financial activities and environmental accounts

6. 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.

7. 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

8. 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.

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

10. 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

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

12. In a particular period (say one year) residents (citizens of the country) earns income in other countries and foreigners earn income in your country Gross national income (GNI) • 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.

13. Standard Industrial Classification of all Economic Activities (ISIC Rev3) 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

14. Standard Industrial Classification of all Economic Activities (ISIC Rev4) 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+N Business services O,P,Q. Public Admin, education, health, social work R,S,T+U. Other services

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

16. Transaction flows in the economy

17. Transactions Production Value added/GDP Income distribution Use of income Saving + Stocks Stocks Other flows Capital transfers Closing balance sheet Opening balance sheet Revaluation Non-financial asset Non-financial asset Capital formation Net lending Other volume changes Financial Assets and liabilities Financial Assets and liabilities Financial transactions

18. Definition of assets

19. Definition of an asset • The assets recorded in the System are economic assets: • ownership rights can be enforced • economic benefits may be derived by holding them, or using them, over time • It is a store of value that depends upon the amounts of the economic benefits that can be derived from it by its owners.

20. Definition of an asset (cont) This value (discounted for inflation) does not usually remain constant but often diminish with the passage of time. (a) Using assets such as machinery in production Different kinds of benefits may be derived such as (b) Property incomes: for example, interest, dividends, rents, etc., received by the owners of financial assets and non-produced assets; (c) Some assets may be held purely as stores of values (precious metals or stones, etc.) without any other benefits being derived from them.

21. Asset boundary • All entities which meet the definition of an asset appear on the balance sheet of the economy. • All assets can be represented by a monetary value • Value represents the market’s view of the total of the benefits embodied in the asset.

22. Types of assets Produced • Enter via production or imports • It exists, like land and sub-soil assets; or • Appears over time and is valued/recognised when there is an equivalent market price • Leave via being exhausted, sold to residents for use other than as asset, sold to non-residents Non-produced • May leave via depletion or impairment

23. Assets in the 1993 SNA Financial assets Non-financial assets Produced Non-produced Fixed Inventories Valuables Tangible Intangible Tangible Intangible - Land - Subsoil assets - Non-cult biological resources - Water resources - Patented entities - Leases and contracts - Purchased goodwill - Buildings - Structures - Machinery & Equipment - Mineral exploration - Computer software - Entertainment, literary or artistic originals - Other

24. Assets in the SNA update Financial assets Non-financial assets Non-produced Produced Fixed Inventories Valuables Goodwill and marketing assets Contracts, leases and licenses Natural resources • IP products • R&D • - Mineral exploration and evaluation • - Computer software and databases • - Entertainment, literary or artistic originals • - Other IP products - Natural land - Mineral dep & energy reserves - Non-cult biological resources - Water resources - Other natural resources Buildings Structures Machinery & Equipment

25. Supply and Use tables

26. Supply and use Equations Supply = Use by product Total supply = Output + imports Total use = Intermediate consumption + Final consumption + Capital formation + Exports

27. Supply table

28. Use table

29. Role of supply and use table • Compilation tool • Verification • Reconciliation • Balancing for • Benchmark estimates • Annual national accounts in constant prices extrapolated using volume indexes or deflating using price indexes • Quarterly national accounts using price and volume indexes from short-term indicators

30. Source data • Annual establishment/enterprise surveys and profit and loss/balance sheets of enterprises • Government revenue and expenditure budgets • Household budget surveys • Custom data on exports and imports of goods • Balance of payments on exports and imports of services • Administrative data Business registers, employment, production, volume and price information, etc.

31. Data can be derived from a variety of different sources, such as administrative and business records, as well as specially conducted censuses and surveys. In practise, however, macroeconomic accounts can seldom be built up by simply aggregating the relevant micro-data. (SNA 93:12)

32. Thank You