Presented by Raymundo J. Talento Director, Economic Statistics Office

1. ESTIMATION OF THE HOUSEHOLD SECTOR (Philippine Case) Presented by Raymundo J. Talento Director, Economic Statistics Office National Statistical Coordination Board International Workshop on household Income, Consumption and Full Accounting of the Household Sector Beijing, China 26-28 March 2012

2. Outline of the Prensentation • Introduction • Scope and Coverage • Data Sources • Estimation Methodology • V. Issues/concerns

3. I. Introduction • Measurement of GDP • Three approaches in GDP Measurement • Production Approach, GDP (P) • 2. Expenditure Approach, GDP (E) • 3. Income Approach, GDP (I)

4. I. Introduction • Measurement of GDP cont’n… • 1. Production Approach, GDP (P) • Unduplicated sum of all the goods and services produced in the domestic economy (by resident producers) • Measurement of GDP by industrial origin • Formula:GDP (P) =  GVA • where: • GVA = Gross Value Added • = Gross Output Less Intermediate • Inputs

5. I. Introduction • Measurement of GDP cont’n… • 2. Expenditure Approach, GDP (E) • Sum of the final uses of goods and services (all except intermediate consumption) measured at purchaser’s prices, less the value of imports of goods and services • Formula:GDP (E) = HFCE + GFCE+ GDCF + X – M • where: • HFCE = Household Final Consumption Expenditure • GFCE = Government Final Consumption Expenditure • GDCF = Gross Domestic Capital Formation • X = Exports • M = Imports

6. I. Introduction • Measurement of GDP cont’n… • 3. Income Approach, GDP (I) • Sum of primary incomes distributed by resident producer units • Formula:GDP (I) = CE + D + T – S + OS • where: • CE = Compensation of Employees • D = Depreciation • T = Taxes (products/production) • S = Subsidies • OS = Operating Surplus

7. I. Introduction • Measurement of GDP cont’n… • 3. Income Approach, GDP (I) • By institutional units. In the present PSNA these are : • Non-Financial • Financial • Government; and • Households and unincorporated enterprises, including non-profit institutions serving households • Also the Rest of the World (ROW) – viewed as the grouping of all non-resident units. 7

8. I. I. Introduction • Measurement of GNI (GNP) • Gross National Income (GNI) • Covers (Income from) Production within the domestic territory (GDP), including production from the rest of the world (NFIA) provided by residents of the Philippines • Formula: GNP = GDP + NPIA • where: • GDP = Gross Domestic Product • NPIA = Net Primary Income From Abroad

9. I. Introduction • THUS, • THE PSNA GENERATES • PRODUCTION, EXPENDITURES AND INCOME ESTIMATES

10. II. Scope and Coverage HFCE consists of actual and imputed expenditures of households for the purpose of acquiring individual consumption of goods & services. Includes: • Individual and institutional households (HHs) • Non-profit institutions serving households (NPISH): 10

11. II. Scope and Coverage HFCE – classified according to purpose - based on the Classification of Individual Consumption according to Purpose (COICOP) as recommended by the 2008 SNA 11

12. II. Scope and Coverage HFCE – includes: Food and Non-alcoholic Beverages Alcoholic Beverages and Tobacco Clothing and Footwear Housing, Water, Electricity, Gas and Other Fuels Furnishings, Household Equipment and Routine Household Maintenance Health Transport Communication Recreation and Culture Education Restaurants and Hotels Miscellaneous Goods and Services 12

13. III. Data Sources Data/information used : • Family Income and Expenditures Survey (FIES) of NSO • Consumer Price Index (CPI) of NSO • 2000 Input-Output (I-O) Table of NSCB • Total output of industry sectors from the estimates of the National Accounts of the NSCB • Foreign Trade Statistics (FTS) of NSO • Administrative-based data of various agencies • (i.e. volume & value of removals for cigars, cigarettes & alcoholic drinks from the BIR) 13

14. IV. Methodology 2000 Benchmark Year - adopted as initial estimate the 2000 I-O estimates of HFCE, with each HFCE I-O code/description classified according to COICOP. 14

15. IV. Methodology Non-benchmark Year (1998-1999, 2001-2010) • the 2000 benchmark estimate of HFCE by sub-component was extrapolated using the trend of the gross output of related industry sector • estimates are reconciled with the other sectors through the supply and use table • it is further validated using the expenditure structure derived from the FIES. 15

16. V. Issues & Concerns • SHOULD THE INCOME AND EXPENDITURES DATA OF THE PSNA AND THE FIES • BE • “CONSISTENT”? • “RECONCILED”?

17. V. Issues & Concerns What is the FIES? • is a household survey being conducted by the NSO every three years • Provides data on family income and expenditures which include among others levels of consumption by item of expenditure as well sources of income in cash and in kind • Source of weights for the CPI • Used for computing poverty incidence • Used for analyzing income distribution • Used as an indicator for NA purposes

18. V. Issues & Concerns The FIES does not collect income/expenditures data from • Non-Financial Institution • Financial Institution • Government • Non-profit institutions serving households • Rest of the World (ROW)

19. V. Issues & Concerns In the PSNA, the Transactors (Institutional Sectors) of the Economy are: • Non-Financial Institution • Financial Institution • Government; and • Households and unincorporated enterprises, including non-profit institutions serving households • Also Rest of the World (ROW) – the grouping of all non-resident units.

20. V. Issues & Concerns • Therefore, if one must “compare” income data from the PSNA and the FIES, the closest one may look for comparability is THE HOUSEHOLD SECTOR!

21. V. Issues & Concerns • IS FIES INCOME = PSNA INCOME OF THE HOUSEHOLD SECTOR?

22. V. Issues & Concerns • FIES INCOME REFERS TO INCOME IN CASH AND IN KIND RECEIVED BY THE HH’s • FIES INCOME INCLUDES (FIES QUESTIONNAIRE): • PART III: INCOME AND OTHER RECEIPTS • PART IV: ENTREPRENEURIAL ACTIVITIES • PART II: EXPENDITURE AND OTHER DISBURSEMENTS ( RECEIVED AS GIFTS)

23. V. Issues & Concerns • FIES INCOME INCLUDES: • Salaries and wages from employment • Net share of crops, fruits and vegetables produced or livestock and poultry raised by other households • Cash receipts, gifts, support, relief and other forms of assistance from abroad • Cash receipts, support, assistance and relief from domestic source • Rentals received from non-agricultural lands, buildings, spaces and other properties • Interest

24. V. Issues & Concerns • FIES INCOME INCLUDES cont’n: • Pension and retirement, workmen’s compensation and social security benefits • Dividends from investment • Other sources of income not elsewhere classified • Family Sustenance Activities • Total Income from Entrepreneurial Activities • Goods and Services Received as gift • Imputed Rental Value of Owner-Occupied Dwelling Units

25. V. Issues & Concerns • PSNA HH INCOME ALSO BASICALLY REFERS TO INCOME IN CASH AND IN KIND RECEIVED BY THE HOUSEHOLD SECTOR • PSNA HH INCOME = COMPENSATION + OPERATING SURPLUS + PROPERTY INCOME + TRANSFERS

26. V. Issues & Concerns • SOURCES OF DIFFERENCES • COVERAGE • CONCEPTUAL/DEFINITION OF INCOME • METHODOLOGICAL ( NOS OF HHS) • DATA-RELATED

27. V. Issues & Concerns • Differences between the national accounts of the NSCB and the income data from the FIES of the NSO. In terms of COVERAGE: PSNA FIES Household & Unincorporated Enterprises Household & Unincorporated Enterprises Individual Households Individual Households Institutional Households Non-profit Institution Serving Household

28. V. Issues & Concerns • Differences between the national income accounts of the NSCB and the income data from the FIES of the NSO. In terms of TYPE OF INCOME covered: NA • covers income of household derived from engaging in unincorporated enterprises, compensation of employee, property income from investments of assets, depreciation from the use of assets, transfers, taxes, subsidies

29. V. Issues & Concerns • Differences between the national income accounts of the NSCB and the income data from the FIES of the NSO. In terms of TYPE OF INCOME covered: FIES • Includes income defined in the NIA but excludes items on depreciation and indirect taxes or subsidies

30. V. Issues & Concerns • Differences between the national income accounts of the NSCB and the income data from the FIES of the NSO. In terms of METHODOLOGY : PSNA • Net Operating Surplus of Households is residually calculated FIES • Total Income from Entrepreneurial Activities

31. V. Issues & Concerns • Differences between the national income accounts of the NSCB and the income data from the FIES of the NSO. In terms of DATA-RELATED DIFFERENCES : FIES • HH response based on recall -underreporting/overreporting of income/expenditures PSNA • Data comes from different sources and estimates are validated through the SUT

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