3rd ICP 2011 Technical Advisory Group Meeting at the OECD, Paris 10, 11 June 2010

Some Background Emphasis was on price collection Belated attention to National Accounts Different estimates for GDP and population 2 Situation in 2005 Lessons learnt Need to establish process to determine GDP and population for the ICP Improved editing procedures required Ensure consistency between expenditures and survey prices

Some Background (cont’d) 3 Proposed Procedures for 2011 A step by step approach Tables/questionnaires were developed to guide the countries Testing in Oman, Lebanon, Kenya, Ethiopia, Hong Kong

Questionnaire on Estimation of BHs for the 2005 ICP Set 2005 as starting point for the 2011 estimation Ensure consistency between 2005 and 2011 Establish how expenditures on basic headings were estimated for ICP 2005 Document the 2005 compilation 4 Objectives Recommended tasks Describe the sources for each Show how data from original sources were adjusted for time; coverage; or definitions

Questionnaire on Estimation of BHs for the 2005 ICP (cont’d) 5 Details required Values obtained from the national accounts Original data source used to estimate expenditure Estimated expenditure in year of data source Adjustments made to data from original data source Brief explanation of adjustments Expenditure reported for ICP 2005 Mission Outcomes Details available in 4 of the 5 countries Time consuming

Commodity Flow Matrix It shows how the supply of a product is distributed among intermediate and final uses Valuation at purchasers’ prices To be completed for products identified as important in relevant BH in any individual country 6 Description GDP could be derived:  either as total supply less intermediate consumption  or as total final expenditures plus net exports If all products were included

Commodity Flow Matrix (cont’d) 7 Mission Outcomes Full support from all 5 countries Support for further development of SUTs but as long-term goal Basic Equalities Total supply at purchasers' prices = domestic production at basic prices + imports at c.i.f. values + trade and transport margins + taxes on products = Total use at purchasers’ prices Total use at purchasers' prices = Intermediate consumption + household final consumption expenditure + government final consumption expenditure + gross fixed capital formation + change in inventories and net acquisitions of valuables + exports (f.o.b.)

Important Products Improve and streamline GDP breakdown Propose items to the regional list of specifications Consistency between expenditures and prices Better compile commodity flows 8 Objectives Recommended Tasks Describe the sources Estimate quantities, prices and total expenditures for each of these products – even roughly

Important Products (cont’d) 9 Details required Data sources used for average prices; quantities; values Indicators to extrapolate forward from latest benchmark Mission Outcomes All countries could identify important products Values could be identified in most cases Quantities and hence average prices not available

Price Formation Provide more details on important products Consistency between expenditures and prices Better compile commodity flows 10 Objectives Important products (domestically-produced and imported) Household final cons exp and GFCF Designed to systematically adjust values recorded at basic prices to the ICP- required basis of purchasers' prices All individual steps required are shown Description

Price Formation (cont’d) 11 Basic Equalities Basic price (ex-factory price) + taxes on products excluding invoiced VAT less subsidies on products equals Producers’ price + VAT not deductible by the purchaser + separately invoiced transport charges + wholesalers’ and retailers’ margins + installation costs (capital formation only) equals Purchasers’ price Basic price (c.i.f. unit value) + customs duties + taxes on products excluding invoiced VAT less subsidies on products equals Producers’ price + VAT not deductible by the purchaser + separately invoiced transport + wholesalers’ and retailers’ margins + installation costs (capital formation only) equals Purchasers’ price DomesticDomestic DomesticDomestic ImportedImported ImportedImported

Price Formation (cont’d) 12 Mission Outcomes None of the 5 countries has data on margins, transport costs or installation costs for individual products Suggest using this form only in countries that currently have commodity-flow approach or SUTs

Check on real expenditure evolution Aim is to provide some basic edits by comparing the per capita notional real expenditures in 2011 with those in Objective To be completed by the Regional Offices Description Data Expenditure in national currency Average “price” Notional real expenditure Population Notional real expenditure per capita

Check on real expenditure evolution (cont’d) 14 Notional real expenditures for 2011 Calculate a “price” for a BH as geometric average of the prices provided by a country for products listed under that BH These BH “prices” are divided into reported expenditures in national currency to obtain the BH notional real expenditures for 2011 Finally, calculate per capita notional real expenditures for both years and change [in%] from 2005 year to 2011

Check on real expenditure evolution (cont’d) 15 Mission Outcomes Change can be two-fold:  prices [difference in products or price escalation]  actual change in per capita real expenditures Suggest splitting the table into 2 parts Prices: to assist in editing the prices collected N.A.: Focus on BHs that behave significantly differently from related BHs

SNA93 Compliance Check Elements affecting the level of GDP 16 Is government defence expenditure on fixed assets that can be used for civilian purposes included in GCF? Is CoFC included on all government fixed assets (roads, dams etc)? Is all mineral exploration (successful and unsuccessful) capitalized? Is expenditure on computer software purchases included in GCF and on software development included in output?

SNA93 Compliance Check Elements affecting the level of GDP 17 Mission Outcomes This form will show whether a country uses an early or recent version of SNA It was tested only in Hong Kong and it showed that Hong Kong is using SNA93 To be sent to all countries where there is a need to confirm their SNA version Is expenditure on entertainment, literary or artistic originals included in GCF and on their development included in output? Is expenditure on valuables included in GCF?

Data Validation 1. Compare GDP and major aggregates with data in the annual national accounts questionnaire 2. Sum of components equals corresponding aggregates 3. Signs of potentially negative expenditures 4. Completeness checks 5. [Non] Allocation of FISIM 6. Are net expenditures abroad allocated across products within HFCE 7. Verify price dynamics from production and imports to final uses for important products 18

Data Validation (cont’d) 8. Compare average price changes from 2005 to 2011 for each basic heading with overall price changes in the country over this period 9. Compute per capita expenditures for each BH 10. Compare shares of GDP contributed by each BH 11. Compare per capita real expenditures for each BH 12. Variations in per capita real expenditures for each BH between countries in each cluster 13. Consistency of PLIs across BHs within a country 14. Variation of PLIs within BHs between the countries in each cluster 19

Timetable Major aggregates for latest year possible J J N N BH details for final cons. aggregates for latest year possible Values for all BHs N N J J J J N N Preliminary data for 2010 J J Major aggregates for 2011 BH values for 2011 J J O O M M J J J J O O M M M= May; J= July; O= October; N=November

21 THANK YOU