Implementation of 2008 SNA in Jamaica

1. Implementation of 2008 SNAin Jamaica

2. Outline • Policy issues - relationship with national accounts framework • The Jamaican System of National Accounts • Current compilation procedures • New requirements for 2008 SNA • Other improvements to the accounts • Next Steps

3. Policy Issues • Vision 2030 • National Development Plan for Jamaica • Outlines national goals, strategies & outcomes • National Outcome #7: A Stable Macro economy • Fiscal balance of 0% of GDP • Debt to GDP ratio of 75% • Real GDP annual growth rate of 5%

4. Policy Issues (cont’d) • As outlined in ‘Fiscal Policy Paper FY 2012/13’ dated May 24, 2012, GOJ committed to achieving the following fiscal targets/ceilings by FY 2015/2016 • Fiscal balance of 0% of GDP • Debt to GDP ratio of 100% or less • Wages to GDP ratio of 9%

5. The Jamaican System of National Accounts • Consolidated Accounts of the nation • GDP by expenditure at current and constant prices • GDP by income • Generation and use of disposable income • Capital account • Rest of the world account

6. The Jamaican System of National Accounts • Value added by industry • Supply and Use Table • Input Output Table • Tourism Satellite Account

7. The Jamaican System of National Accounts • Currently not included • Institutional sector accounts • Financial account • Other changes in assets account • Balance Sheet

8. Current compilation procedures Jamaican System of National Accounts • prepared on the 1993 United Nations System of National accounts (1993 SNA) • base year for the constant price estimates is 2007

9. Current compilation procedures • Annual national accounts estimates prepared using the production, income and expenditure approaches • Quarterly national accounts estimates prepared using the production approach

10. Current compilation proceduresAnnual GDP by product • Estimated at current and constant prices • classificationof industries used in the accounts is the Jamaica Industrial Classification (JIC 2005) -a local adaptation of the United Nations International Standard Industrial Classification of all Economic Activities (ISIC Rev.3)

11. Current compilation proceduresAnnual GDP by product (cont’d) • a production account is compiled for each product group in an industry • production accounts by industry are calculated at the five digit level of the JIC • twelve industry categories - disaggregated into 248 product groups

12. Current compilation proceduresAnnual GDP by expenditure • Estimated at current and constant prices • Expenditure approach – sum of household spending, government spending on goods and services, investment in fixed capital (construction, machinery and equipment), change in inventory and exports less imports of goods and services

13. Current compilation proceduresAnnual GDP by expenditure (cont’d) • Household Final Consumption Expenditure is classified using Classification of Individual Consumption According to Purpose (COICOP) • Government Final Consumption Expenditure currently not classified using COFOG • Gross fixed capital formation is broken down by type of capital goods

14. Current compilation procedures Quarterly GDP by product • The preparation of quarterly value added estimates incorporates the use of quarterly indicators to extrapolate value added by economic activity • Quarterly estimates at constant prices are derived from quantity indicators or value indicators, which are deflated by appropriate price indices. Trend extrapolation is also utilized when there are no available indicators

15. Current compilation procedures Quarterly GDP by product (cont’d) • The estimates are benchmarked to the annual estimates using the ‘BENCH’ programme which is a generalization of the Denton Method. This programme was developed by Statistics Canada (STATSCAN) • The estimates are seasonally adjustedusing the X11ARIMA seasonal adjustment method

16. New Requirements for 2008 SNA Ancillary activities • A producer undertaking purely ancillary activities should be treated as a separate establishment and classified according to principal activity • This methodology is currently being used in the Jamaican system

17. New Requirements (cont’d)Financial Services • FISIM: Jamaican system • Currently calculated as property income receivable less interest payments • Currently allocated between intermediate consumption (not by industry but rather as a notional industry) and household consumption

18. New Requirements (cont’d)Financial Services • FISIM should be calculated with respect to a reference rate • Output of FISIM = (rL-rr)fL + (rr-rD)fD, rr=reference rate rL=interest rate on loans fL=stock of loans rD=interest rate on deposits fD=stock of deposits

19. New Requirements (cont’d)Financial Services • Actions to be taken • Identify a reference rate that excludes service charge and reflects the risk and maturity structure of deposits and loans • Allocate that part of FISM apportioned to intermediate consumption to user industries

20. New Requirements (cont’d)Financial Services • Output of Central Bank • Currently being estimated as the sum of costs in Jamaican system • New recommendation is to separate the services of the Central Bank into the 3 groups: • financial intermediation • monetary policy services • supervisory services

21. New Requirements (cont’d)Research & Development • The output of research and development should be capitalized • Jamaican system • Research and development activities were not identified separately on Annual National Income questionnaire. As a result, these would have been included in ‘other expenditure’ and treated as intermediate consumption

22. New Requirements (cont’d)Goods for processing • In the case of goods sent abroad for processing, the export of the processing country is the processing fee, which is also the output of the processor as there is no change in ownership of goods • This methodology is currently being used in the Jamaican system • Methodology needs to be harmonized with the Balance of Payments

23. New Requirements (cont’d) • Treatment of employee stock options as compensation of employees • Valuation of output for own final use by households and corporations to include return to capital • These areas require further research to inform actions to be taken

24. Other Improvements • Identify methodology to estimate consumption of fixed capital of Central Government including public education and health • Collaborate with the Ministry of Finance to estimate imputed pension contribution by Government • Revision of Annual National Income questionnaires • Review of administrative data sources

25. Next Steps • Classify Government Final Consumption Expenditure using COFOG • Publish GDP by expenditure at constant prices • Revise JIC based on ISIC Rev 4 • Ongoing revisions to the estimation of the non-observed economy • Introduction of monthly production volume index and expansion of producer price index • Household Expenditure Survey to be undertaken in 2015

26. Schedule for Implementation • The first phase will be completed in 2016 and should cover Milestone 2 of the 2008 implementation, quarterly GDP by expenditure and improvements to the national accounts that were not undertaken in the last major revision to the system. This should also lead to improvement in the coverage

27. Schedule for Implementation • Institutional sector accounts- gradual introduction final set of accounts by 2020, starting with the government sector • STATIN will not be able to implement the full scope of the SNA • No plans in the medium term to include the financial accounts and balance sheets

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