Comprehensive Overview of Ireland's Institutional Sector Accounts and Economic Indicators

1. Central Statistics Office Institutional Sector Accounts Non-Financial Mary Brew Integration Division National Accounts UCC 16th March 2011

2. Recap • Session 1 – Key Social Indicators • Session 2 – Key Business Indicators • Session 3 – Balance of Payments – Ireland’s globalised economy Quarterly National Accounts – Headline indicators of total economic activity • Session 4 – Measures other than GDP

3. The Stiglitz, Sen, Fitoussi Commission Report (2009) • The report was written by economists and social scientists • To Political Leaders, Policy Makers, The Academic Community, Statisticians and Civil Society Organisations • To identify the limits of GDP as an indicator of economic performance & social progress • To recognise other relevant measures e.g. household income, consumption and wealth

4. European Sector Accounts • Outcome of collaboration between Eurostat, the European Central Bank, National Statistical Institutes and National Central Banks • Output for Euro Area – 16 countries and European Union – 27 countries • Detailed economic development by institutional sector at current prices • Key ratios – e.g. household saving rate

5. Institutional Sector Accounts 3 approaches to measuring National Income • Output – Value added by each producer Σ output - Σ intermediate consumption + net product taxes • Income – All income generated Σ COE + GOS/GMI + net taxes • Expenditure – All spending on final demand C + I + G + X - M

6. Three Measures of GDP

7. Institutional Sector Accounts • Vertical analysis Provides by institutional sector a systematic description of the different stages of the economic process • Horizontal analysis Institutional sectors are distinguished in terms of their principal economic behaviour

8. Generation of Income Account

9. Institutional Sectors (Horizontal Analysis) • Mutually exclusive institutional sectors that make up the total economy • Non-financial corporations • Financial corporations • General Government • Households • Non-profit institutions serving households • Rest of World

10. Sequence of Accounts(Vertical Analysis) • Institutional Sector Accounts are built around a sequence of inter-connected accounts • current accounts • Production, generation, allocation, distribution and use of income • accumulation accounts • Financial and non-financial accumulation • balance sheets • Linked sequentially • Balancing item from one account provides the starting point for the next account

11. Sector Accounts Financial Balance sheet Production - GDP Financial Accounts Generation of Income - GOS Capital Accounts – Net Lending/Borrowing Allocation of Primary Income - GNI Secondary Distribution of Income - GDI Use of Disposable Income - Saving

12. Non-Financial Accounts • Current accounts distinguish between: resources – transactions that add to the amount of economic value of a sector uses – transactions that reduce the amount of economic value of a sector

13. Social Contributions D 61 Household Sector €-15,797,

14. Current Accounts • Production account measures the output of goods and services and the value of goods and services used in making them Output – intermediate consumption = GVA GVA + (taxes – subsidies on products)=GDP GDP – consumption of fixed capital = NDP Balancing item = Net domestic product

15. GVA: Output – Intermediate Consumption

16. Current Accounts • Distribution and use of income accounts • Generation of income account – How is net domestic product distributed to the factors of production: Compensation of employees (labour) Taxes less subsidies on production (government) Balancing item: net operating surplus/mixed income

17. Profit Share of Non-Financial Corporations

18. Current Accounts • Allocation of primary income account – primary income is received from direct participation in the production process and from ownership of an asset put at the disposal of another Balancing item – net national income ( the balance of primary income) Memorandum – entrepreneurial income account – Financial and non-financial corporations – balancing item corresponds to the concept of current profit as used for business accounting.

19. Current Accounts • Secondary distribution of income account – shows how the balance of primary income is redistributed through: • Current taxes • Social contributions and benefits and • Other current transfers Balancing item – net disposable income • Use of disposable income account – how disposable income is divided between final consumption expenditure and saving Balancing item - saving

20. Annual change in Household Net Disposable income and Household Final Consumption

21. Household Saving Ratio

22. Accumulation Accounts • Accumulation accounts record the changes in the assets and liabilities of sectors and the change in their net worth • Capital account • Change in net worth due to saving and capital transfers account Balancing item – changes in net worth due to saving and capital transfers • Acquisitions of non-financial assets account Balancing item – net lending or borrowing • Financial account

23. Investment Rate of Non-Financial Corporations

24. Investment Rate of Households

25. Net Lending/Borrowing

26. Household Net Lending/Borrowing

27. Rest of World • External account of goods and services balancing item – external balance of goods and services (imports – exports) • External account of primary incomes and current transfers balancing item – current external balance (corresponds to saving by the institutional sectors) • Capital account balancing item – net lending or borrowing (equal, but with the opposite sign, to net lending or borrowing of the resident institutional sectors)

28. Analytical Potential of Sector Accounts The Economy • Gross Value Added • Net Lending/Borrowing Households • Household Net Disposable Income and Final Consumption • Household Saving Rate - Calculated in % as: gross saving / gross disposable income (D8* is included)

29. Analytical Potential of Sector Accounts • Investment Rate of Households - Calculated in % as: gross fixed capital formation / gross disposable income (D8* is included • Household Net Lending/Borrowing Non-Financial Corporations • Profit Share of Non-Financial Corporations - Calculated in % as: gross operating surplus / gross value added of non-financial corporations • Investment Rate of Non-Financial Corporations - Calculated in % as: gross fixed capital formation / gross value added of non-financial corporations

30. Analytical Potential of Sector Accounts Government • Government Income • Government Expenditure • Government Savings and Net Lending/Borrowing

31. Government Income

32. Government Expenditure

33. Government Saving and Net Lending/Borrowing

34. Institutional Sector Accounts Financial Balance sheet Production - GDP Financial Accounts Generation of Income - GOS Capital Accounts – Net Lending/Borrowing Allocation of Primary Income - GNI Secondary Distribution of Income - GDI Use of Disposable Income - Saving

35. Central Statistics Office Thank You