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

Overview of System of National Accounts

(SNA)

I. Introduction to SNA

UN Statistical Institute for Asia and the Pacific

System of National Accounts System of National Accounts

The national accounts are the source of information about the state and performance of the economy

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

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

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

Structure of the SNA

A set of national accounts provides:

A comprehensive and detailed A comprehensive and detailed recording recording

of the flows and stocks of an economyof the flows and stocks of an economy

in a systematic and integrated manner.in a systematic and integrated manner.

Flows and stocks

Stocks are holdings of assets and liabilities at a given timeStocks are holdings of assets and liabilities at a given time

Fixed capital, inventories, money and wealthFixed capital, inventories, money and wealth

Flows reflect the creation, transformation, exchange, transfer or loss of economic valueFlows reflect the creation, transformation, exchange, transfer or loss of economic value

Flows provide a “moving picture” of the economyFlows provide a “moving picture” of the economyProduction aggregates, consumption expenditure, investment and saving are all flow variables

Production aggregates, consumption expenditure, investment and saving are all flow variables

Flows and stocks

The way flows and stocks are recorded The way flows and stocks are recorded is governed by a number of specific is governed by a number of specific rules and conventions aiming at rules and conventions aiming at quantifying the economic entries as quantifying the economic entries as precise and consistent as possibleprecise and consistent as possible..

The way flows and stocks are recorded The way flows and stocks are recorded is governed by a number of specific is governed by a number of specific rules and conventions aiming at rules and conventions aiming at quantifying the economic entries as quantifying the economic entries as precise and consistent as possibleprecise and consistent as possible..

These have to do with timing, valuation, These have to do with timing, valuation, and the boundaries that distinguish and the boundaries that distinguish economic flows and stocks from non-economic flows and stocks from non-economic variableseconomic variables..

These have to do with timing, valuation, These have to do with timing, valuation, and the boundaries that distinguish and the boundaries that distinguish economic flows and stocks from non-economic flows and stocks from non-economic variableseconomic variables..

Compilation Compilation

Compilers of the NA have to content with all sorts of conceptual and data problems

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)

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

To cope with these problems a variety of conventions are used to classify, measure and exclude various items

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.

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

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

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.

What is SNA ? (contd.)

Integrated FrameworkPromotes integration of economic and

related statistics in a system that is based on consistent economic and statistical concepts and methods allowing comparative analysis.

Resources of the Country

Human Human resourcesresources

Natural Natural resourcesresources

ProducedProduced resourcesresources

Financial Financial resourcesresources

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.

Human ResourcesPopulation ( Children, Adult, Elderly)

Source of labour for the economy (means of production)

Capable of managing other resources

Can reproduce itself Consumes/Uses resourcesObject of development

Natural Resources(Air, Land, Water, Atmosphere, Biota, Forest, Etc.)

Provide means and material inputs for production

Absorb waste and residualsReproduce itself, MostlyProvide environment for living

and consumption services

Produced Resources.. Fixed assets (Buildings, Infrastructure, Transports, Goods in Inventory, Livestock, etc.)

Result of production processUsed as means or material input to

productionHelp Economic Growth and its

Acceleration

Financial Resources(Currency, Deposits, Bonds, Equities, etc.)

Created to facilitate economic transactions

Most resources have liability counterpart

Used as medium of transactionProvide means for flows and use

of resources

OPENING STOCK OF RESOURCES

HumanHuman ProducedProduced NaturalNatural FinancialFinancial

PRODUCTIONPRODUCTION

IncomeIncome Goods & ServicesGoods & Services ResidualsResiduals

Intermediate consumption

Final Consumption

Accumulation Exports

DISTRIBUTION & USEDISTRIBUTION & USE

CHANGE: human

CHANGE:produced, natural, financial+

Other changes(volume, price)

CLOSING STOCK OF RESOURCES

HumanHuman ProducedProduced NaturalNatural FinancialFinancial

Format of the Integrated Framework - Presenting Stock and Flows

Stock of resources (opening)ProductionConsumptionCapital formation, Net ExportsOther Changes in Volume/PriceStock of resources (closing)

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

Resources

Stock of Resources

- Key factor to attain Society’s goal

Optimization of Use of Resources

- Key principle to Development Planning

Go to Stocks and Flows..

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) ?

Economic FlowsActors, Actions, Activities

WHO does WHAT ? By WHAT means ?For WHAT purpose ?With WHOM in exchange of WHAT ?With WHAT Changes in Stocks ?

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)

Institutional sectors of the economy

Non-financial corporationsFinancial corporationsGovernment units, including social security

fundsNPIs serving households (NPISHs)Households

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)

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

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)

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)

Simple example

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

GDP by Expenditure approach

Same equation can be viewed as:GDP = Final consumption + Gross CF +

Exports – Imports (Expenditure approach!)

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

Gross domestic product (GDP) 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

The GDP is the total value of goods and services produced within the boundaries of a country in a particular period

GDP methods 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

Gross national income (GNI) 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

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.

The GNI is the amount a country has available for consumption and saving.

Simple example

A+B. Agriculture, forestry and fishingC. Mining and quarryingD. ManufacturingE. Electricity, gas and waterF. ConstructionG+H. Wholesale and retail trade, hotels and restaurantsI. Transport, storage and communication J+K. Financial intermediation, insurance, real

estate and business servicesL+M +N. Public Admin, education, health, social work O. Other community, social and personal services

A+B. Agriculture, forestry and fishingC. Mining and quarryingD. ManufacturingE. Electricity, gas and waterF. ConstructionG+H. Wholesale and retail trade, hotels and restaurantsI. Transport, storage and communication J+K. Financial intermediation, insurance, real

estate and business servicesL+M +N. Public Admin, education, health, social work O. Other community, social and personal services

Standard Industrial Classification of all Economic Activities (ISIC Rev3)

Standard Industrial Classification of all Economic Activities (ISIC Rev3)

A. Agriculture, forestry and fishingB,C,D+E. Mining and quarrying, manufacturing, electricity, gas and

water of which C. ManufacturingF. ConstructionG,H+I. Wholesale and retail trade, transport accomm. and food services

J. Information and communication J+K. Financial intermediation, insurance,L. Real estateM+N Business servicesO,P,Q. Public Admin, education, health, social work R,S,T+U. Other services

A. Agriculture, forestry and fishingB,C,D+E. Mining and quarrying, manufacturing, electricity, gas and

water of which C. ManufacturingF. ConstructionG,H+I. Wholesale and retail trade, transport accomm. and food services

J. Information and communication J+K. Financial intermediation, insurance,L. Real estateM+N Business servicesO,P,Q. Public Admin, education, health, social work R,S,T+U. Other services

Standard Industrial Classification of all Economic Activities (ISIC Rev4)

Standard Industrial Classification of all Economic Activities (ISIC Rev4)

Financial corporate sector Financial corporate sector

Institutional sectorsInstitutional sectors

ROW ROW

NPISHs NPISHs

Household sector Household sector

General government sector General government sector

Non-financial corporate sector Non-financial corporate sector

Transaction flows in the economy

A National Accounts perspective

Use of disposableincome

Production

Financing &capital transfers

Generation ofincome

Allocation ofprimary income

Secondarydistribution of income

Redistributionof income in kind

Final consumption

Capital formation

Saving

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;

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

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

SNA 93 Production Boundary

ALL goods*

Productive activities

ALL services for sale, barter or in-kind pay

Some services forown-final consumption

Economic Non-Economic

Some services forown final consumption

Implications for production of labour statistics

Activities covered to determine economically active population

Own final consumption.. services

Included: own account production of housing services domestic and personal services produced by

paid domestic staffExcluded:

Cleaning, decoration, cooking caring maintenance and repair of dwelling and durables within the same household

Note: all goods for own consumption included.

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.

Production (Contd.)

-Goods and Services

Production of Goods and Services Supply Use

Products Intermediate and Final UseBy-products Intermediate and Final Use Residuals Recycled, Left to be absorbed

back by Nature Production of Goods and Services

- Generates Income to Resources

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

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

Production-Consumption Cycle

Production

Consumption

LabourGoods & Services

Exp

end

iture

s

Incom

es

Government

Households

Consumption

Income

Govt. Expenditure

FinancialMarket

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

Table

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

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

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

GDP includes

All goods & services for which producers receive compensation

Illegal and Concealed productionProduction of goods for own

consumption

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

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

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 duplicatedeg: flour mill and a bakery..

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

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

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

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

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