International Workshop Beijing, 8-10 June 2009 From Data to Accounts

1. International WorkshopBeijing, 8-10 June 2009From Data to Accounts Session VI: General Discussion Moderator : Frederick W H HO

2. >> Challenges faced by National Statistical Offices in compiling economic statistics data : ENSURING coherence CONTRIBUTING to the Advancement of the System of National Accounts implementation ………………………………………………… >> A presentation on An Integrated Economic Statistics Programme (IESP): With the National Accounting System as the IESP’s foundation and core component >> General discussion

3. An Integrated Economic Statistics Programme (IESP): With the National Accounting System as the IESP’s foundation and core component

4. Purposes and Uses of an IESP(1) • Economic Analysis • (a) Enabling macro-economic and micro-economic analysis • (b) Monitoring the performance of the overall economy, the external sector, the financial sector and the labour sector etc.

5. Purposes and Uses of an IESP(2) • Macro-level policy formulation and decision • (a) Sustaining the competitiveness of successful industries • (b) Identifying and assisting new industries • (c) Developing strategic partnership with other economies • (d) Demand and supply balances

6. Purposes and Uses of an IESP(3) • Action programme planning for sectoral developments • (a) tracking the developments in specific economic sectors and determining action strategies for their developments • (b) sectoral productivity studies

7. Purposes and Uses of an IESP(4) • Business studies • (a) profitable lines of business • (b) appropriate mix of products • (c) optimum cost structure • (d) firm level productivity studies and benchmarking • (e) investment decisions • (f) marketing tactics

8. Purposes and Uses of an IESP(5) • For the Statistical Authority: facilitating coherence of statistical development -- User needs are better met overall -- More efficient use of statistical resources • For the Statistical Authority: an aid to data quality control -- Achieving consistency of different branches of statistics -- Identifying basic data problems as revealed by serious data inconsistencies

9. Components of an IESP • (1) Economic Censuses/surveys ( including the production indices and business receipts indices) • (2) External Trade Statistics Systems (Merchandise trade and trade in services) • (3) Price Statistics systems • (4) Financial and Monetary statistics systems • (5) The National Accounting System

10. (5) The National Accounting System (i) Gross Domestic Product ( GDP )

11. GDP by Production Approach and Income Approach Input (1)： Intermediate consumption Gross output (4) Producing Unit (A) Value of goods and services consumed (B) Value of products Input (3): Capital and entrepreneurship Input (2): Labour (C) Return to labour: “Compensation of employees” (D) Return to capital and entrepreneurship: “Gross operating surplus” A+C+D=B Value added= ( B ) –( A )[production approach] = ( C ) + ( D ) [income approach] Physical flow Value flow (i.e. money or equivalent) Value added of an industry= Sum of value added of all producing units in the industry GDP (at factor cost) = Sum of value added of all industries

12. Relative Shares of “Value added”of different industriesin GDP

13. Relative Shares of Compensation of Employees and Gross Operating Surplusin GDP

14. Gross Output --Goods and services produced by Producing Units  intermediate use : outputs used by some other industries  final use : outputs going to > households > government—for the production of government services > capital formation > export

15. C M G X I GDP by Expenditure ApproachConsider only goods and services for Final Use C= Private consumption expenditure G= Government consumption expenditure I= Investment (Gross domestic fixed capital formation plus Changes in inventories) X= Exports of goods and services M = Imports of goods and services GDP = C + G + I + X M i.e. Sum of the Final Uses LESS the import contents [We are unable to remove the import contents at the various stages of domestic production]

16. GDP by Expenditure Approach[[ GDP = C + G + I + X M ]] Total supply =Total Final Demand (4785) (4785) GDP + M = C + G + I + X 1613 + 3172 = 966 + 1130 + 345 + 3344 The above are 2007 figures in HK$ billion (Note - Figures may not add up due to rounding) Ratio to GDP • An indication of the relative economic significance • Ratio of X to GDP is 207% • X has both domestic contents and import contents. It is not a “component” of GDP. Hence it is totally possible for the ratio to be bigger than 100%

17. Government Consumption expenditure Input (1)： Intermediate consumption Government (as the Producing Unit for Government Services ) Gross output (4) (A) Value of goods and services consumed (B) Value of government services Input (3): Capital and entrepreneurship = 0 Input (2): Labour (C) Return to labour: “Compensation of employees” (D) Return to capital and entrepreneurship: “Gross operating surplus” = 0 Physical flow Government Consumption Expenditure =Value of government services produced = A+ C + 0 = A + C -- A method of “Evaluating output by input” Value flow (i.e. money or equivalent)

18. (5) The National Accounting System (i) GDP • (I) GDP from the three approaches (production approach, income approach and expenditure approach) --- > production approach enables us to look at the relative contributions of different economic sectors; > income approach enables us to look at income distribution at the macro- level; > expenditure approach : grossing over the intermediate processes and looking at just the final uses of the goods - enables us to look at the use of available resources by the economy

19. (5) The National Accounting System (i) GDP • (II) Data for compilation of the three GDP’s -- • data for the production-based GDP come (mainly) from economic censuses/surveys, • data for the income-based GDP come from economic censuses/surveys, tax systems, household surveys etc., • data for the expenditure-based GDP come from household expenditure surveys, economic censuses/surveys, government accounts, trade statistics etc.

20. (5) The National Accounting System (i) GDP • (III) It may be noted that : • (a) data from one source may serve as source for more than one of these three GDP calculations • (b) Reconciliation of the three GDP’s provide a good framework for consistency check to throw light on possible problems in some of the data sources. [ Important note, GDP (P) is at factor cost GDP ( I) is at factor cost GDP (E) is at market price And, GDP(P) = GDP(I) and GDP(E)= GDP(P) + Indirect Taxes ]

21. (5) The National Accounting System(ii) Gross National Product (GNP) GNP = GDP + Factor income earned by residents outside the economy -Factor income earned by non-residents within the economy Factor income • direct investment income; • portfolio investment income; • other investment income; and • compensation of employees

22. (5) The National Accounting System(iii) Other statistics, presented in the form of accounts— • to show the generation and distribution of income • to show how savings are accumulated and placed in the form of assets • external transactions

23. Components of an IESP • (6) Balance of payments - to show transactions (current or capital ) across the boundary of the economy in question • (7) Closely associated systems --- demographic statistics system --- labour statistics system

24. Features of an Integrated Economic Statistics programme (1) Interlocking nature of the components Each component produces data which often may be used both by final data users and by some other components as input data

25. Features of an Integrated Economic Statistics programme (2) Coherence among the components – >> The components fit together to provide a comprehensive coverage of the important economic variables; >>common definitions and classifications (most preferably common International Standards); >>promotes consistency of data

26. Features of an Integrated Economic Statistics programme (3) Coherence among institutions – Harmonization in the collection activities for raw data >> Sources >> Methods >> Timing

27. Features of an Integrated Economic Statistics programme • Good communication and coordination among institutions responsible for the different components – >> inter-institutional relationship; >> relationship with raw data suppliers; >> relationship with users of statistical data

28. GENERAL DISCUSSION Challenges faced by National Statistical Offices in compiling economic statistics data : ENSURING coherence CONTRIBUTING to the Advancement of theSystem of National Accounts implementation