Mr. Yusuf Siddiqi Consultant for CARTAC

1. Workshop on Supply and Use TablesSession 4: The Role of the SUT for Improving the Quality of National Accounts EstimatesPort of SpainTrinidad and Tobago May 12 to 16, 2014 Mr. Yusuf Siddiqi Consultant for CARTAC

2. SUT and Improving Quality Most countries compile GDP by production approach and estimate outputs and intermediate consumption by industry. Some countries also compile GDP by the expenditure approach. Theoretically, both approaches should yield identical estimates of GDP but in practice, the estimates of production-based and expenditure GDP would be different. IMF Statistics Department

3. SUT and Improving Quality The difference between the two measures of GDP is called statistical discrepancy. The SUT framework incorporates simultaneously both approaches for measuring the GDP and yields identical production based and expenditure based GDP with no statistical discrepancy. IMF Statistics Department

4. SUT and Improving Quality • This feature of the SUT is due to the following identities in the system. • Total outputs of industries = Total intermediate consumption + Value added. • Total outputs of commodities of industries = Total intermediate consumption + Total product uses in the final demand categories. • Intermediate consumption being common, GDP production-based = GDP expenditure-based. IMF Statistics Department

5. SUT and Improving Quality Another feature of the SUT framework is the consistency of definition, classification and valuation of the flows. The diverse data sources do not follow a standard classification system. For instance, the same product is labeled differently by the producing industries, using industries, exporters and importers. Then each classification has its own aggregation parameters. IMF Statistics Department

6. SUT and Improving Quality The SUT uses a standard commodity classification (CPC), which is consistently applied to all transactions —production, imports, exports, industry use and domestic final use. To achieve this, a concordance table is prepared that maps transactions coming from different classification systems. IMF Statistics Department

7. SUT and Improving Quality • The supply of a commodity originates in domestic production and/or imports. • The same product entering the economy may have one or several uses: • Intermediate consumption • Household final consumption expenditure • Government final consumption expenditure • Fixed capital formation • Inventories or exports. IMF Statistics Department

8. SUT and Improving Quality • As two sides are on different valuation: in order to balance total supply with total use, both must be valued in the same way. • The most usual ways of achieving this is to : • Raise the total supply to purchasers prices, or • Reduce total use to basic prices .d uses are at purchasers’ prices. • Hence, for the purpose of balancing, the supply side is raised to purchasers’ prices by adding the trade and transport and tax margins to the supply side. • This consistent valuation ensures proper balancing of products. • Lets recapitulate the distinction between purchasers’, producers and basic prices. IMF Statistics Department

9. SUT and Improving Quality The integration of supply and use tables have considerable effects on the overall quality of the national accounts. The SUT maximizes the exploitation of information from primary sources. The incorporation of all basic sources in the SUT framework establishes a good foundation for making reliable estimates. Many plausible restrictions are built into the framework. IMF Statistics Department

10. SUT and Improving Quality Examples are that supply equals use at product level or the sum of products allocated to intermediate consumption of an industry should be equal total to intermediate consumption of the industry based on accounting statistics. If a detailed product classification is used it will be possible to apply common sense more effectively. It is one benefit of the commodity flow method that the more homogenous a product is the easier the allocation and distribution to industries or categories of final demand will be. IMF Statistics Department

11. SUT and Improving Quality Product balancing is a powerful tool for a national accounts compiler, because data coming from different sources are confronted in the SUT framework and inconsistencies, gaps and weaknesses in the basic data are revealed leading to appropriate corrections in a logical framework. IMF Statistics Department

12. SUT and Improving Quality For example, a product cannot be balanced because the survey cannot estimate the universe. Take a simple example of household services. It is almost impossible to collect the data on household services. In this case, the value of production can be inferred from the expenditure side. IMF Statistics Department

13. SUT and Improving Quality The SUT framework provides a single source where coherent estimates of the flows of supply and use of the products are available, a boon for market analysts and tax analysis etc. IMF Statistics Department

14. SUT and Improving Quality The SUT is the recommended framework for calculation of GDP in constant prices. In order to deflate the SUT, both Make and Use tables have to be transformed to the same valuation base. Usually the Use table is transformed to basic prices valuation. IMF Statistics Department

15. SUT and Improving Quality The basic price valuation simplifies the deflation process of the tables. Each product in the basic price table can be deflated by one price whereas in the purchasers’ prices table we would need as many prices as the number of transactors. For example, firms do not pay the same margins as the household. IMF Statistics Department

16. SUT and Improving Quality The basic price valuation simplifies the deflation process of the tables. Each product in the basic price table can be deflated by one price whereas in the purchasers’ prices table we would need as many prices as the number of transactors. For example, firms do not pay the same margins as the household. IMF Statistics Department

17. SUT and Improving Quality The SUT at the basic prices is also the basis for the construction of symmetric input output tables for analytical purposes. IMF Statistics Department

18. SUT and Improving Quality Finally, the SUT provides helpful feedback to the data collecting areas in the agency so that they make appropriate changes in the survey for improvement in future data collection. The mangers also get informed about the data requirements and improvements needed in the statistical system for compilation of reliable national accounts. IMF Statistics Department

19. SUT and Improving Quality A periodic SUT table is indispensible for providing an anchor to the annual/quarterly production accounts. In the absence of commodity balancing the problems of coverage, gaps and errors cannot be identified. IMF Statistics Department

20. SUT and Improving Quality For example one country has been publishing the data on exports without realizing that its level of production did not match its exports. Perhaps, some exports should be labeled as re-exports but the question of coverage remains. The SUT can be updated using the past coefficients and aggregate data. The SUT can play a role in the production of preliminary annual or even quarterly accounts. IMF Statistics Department

21. SUT and Improving Quality For example one country has been publishing the data on exports without realizing that its level of production did not match its exports. Perhaps, some exports should be labeled as re-exports but the question of coverage remains. The SUT can be updated using the past coefficients and aggregate data. The SUT can play a role in the production of preliminary annual or even quarterly accounts. IMF Statistics Department

22. SUT and Improving Quality The SUT serves as a benchmark for annual and sub-annual estimates of GDP. The SUT also provides the basic data for developing Tourism Satellite Account. The Bahamas Statistical office has already benefited from these roles of the SUT. Bahamas developed the first SUT for the year 2000 with the CARTAC assistance and has since compiled the SUT for 2005 and 2007 without any external assistance. IMF Statistics Department

23. Thank you! IMF Statistics Department