Overview of System of National Accounts (SNA) I. Introduction to SNA

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

2. 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

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. 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)

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 Natural resources Human resources Producedresources 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 ResourcesPopulation ( 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 CLOSING STOCK OF RESOURCES Human Human Produced Produced Natural Natural Financial Financial PRODUCTION Income Goods & Services Residuals DISTRIBUTION & USE Final Consumption Intermediateconsumption Accumulation Exports Other changes (volume, price) CHANGE: human CHANGE: produced, natural, financial +

20. Format of theIntegrated 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 theIntegrated 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 Resourcesrequired 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 FlowsActors, 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. 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

40. 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.

41. Simple example

42. 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

43. 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

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

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

49. Productive activities Economic Non-Economic ALL goods* ALL services for sale, barter or in-kind pay Some services for own-final consumption Some services for own final consumption SNA 93 Production Boundary 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.