Central Statistics Office

Institutional Sector Accounts Non-Financial

Mary Brew

Integration Division

National Accounts UCC 16th March 2011

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

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

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

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

Three Measures of GDP

Three measures of GDP 2009 (€m)

Value Added   Income   Expenditure  

Output 348,545COE 73,224Consumption (including G) 112,049

+ Taxes on products 16,234GOS/GMI 70,620Investment 23,195- Subsidies on products 808+ Taxes 18,372+ Exports  144,782 - Intermediate  Consumption  204,325- Subs 2,571- Imports 120,380

     

GDP 159,646   159,646   159,646

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

Generation of Income Account

Resources S.1 S.11 S.12 S.13 S.14/S.15 S.1N S.2

B.1g Gross domestic product 159,646 75,098 14,063 21,956 33,850 14,678  

D.3 Subsidies, received 2,571 166 0 0 1597 808  

D.31 - Subs on products 808         808  

D.39 - Other subs on production 1,763 166 0 0 1597   

R211 Total resources 162,216 75,265 14,063 21,956 35,446 15,486  

Uses              

D.1 COE  73,224 35,012 6,007 19,817 12,387   405

D.2 Taxes paid 18,372 1563 97 0 478 16,234  

D.21 - Taxes on products 16,234         16,234  

D.29- Other taxes on production

2,138 1563 97 0 478   

B.2g GOS  58,377 38,689 7,959 2,139 10,338 -748  

B.3g Mixed income 12,243       12,243    

U211 Total uses  162,216 75,265 14,063 21,956 35,446 15,486  

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

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

Production - GDP

Generation of Income - GOS

Allocation of Primary Income

- GNI

Secondary Distribution of Income - GDI

Use of Disposable Income - Saving

FinancialBalance sheet

Sector Accounts

Capital Accounts – Net Lending/Borrowing

Financial Accounts

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

Household Sector€-15,797,

Social Contributions D 61

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

GVA: Output – Intermediate Consumption

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

Profit Share of Non-Financial Corporations

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.

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 transfersBalancing item – net disposable income

Use of disposable income account – how disposable income is divided between final consumption expenditure and savingBalancing item - saving

Annual change in Household Net Disposable income and Household Final

Consumption

Household Saving Ratio

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

Investment Rate of Non-Financial Corporations

Investment Rate of Households

Net Lending/Borrowing

Household Net Lending/Borrowing

Rest of World

External account of goods and servicesbalancing item – external balance of goods and services (imports – exports)

External account of primary incomes and current transfersbalancing item – current external balance (corresponds to saving by the institutional sectors)

Capital accountbalancing item – net lending or borrowing (equal, but with the opposite sign, to net lending or borrowing of the resident institutional sectors)

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)

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

Analytical Potential of Sector Accounts

Government Government Income Government Expenditure Government Savings and Net

Lending/Borrowing

Government Income

Government Expenditure

Government Saving and Net Lending/Borrowing

Production - GDP

Generation of Income - GOS

Allocation of Primary Income

- GNI

Secondary Distribution of Income - GDI

Use of Disposable Income - Saving

FinancialBalance sheet

Institutional Sector Accounts

Capital Accounts – Net Lending/Borrowing

Financial Accounts

Central Statistics Office

Thank You