Introduction
The production account is compiled for fourteen industries according to the International Standard Industrial Classification (ISIC Revision 3) adopted by the Zimbabwean economy. Under normal circumstances main sources of data are economic censuses carried out yearly for agriculture, manufacturing, mining and quarrying, construction, and, water and electricity; annual surveys for services industries (used to determine cost structures); central and local government accounts; sales taxes; and employment statistics on numbers of employees and earnings as well as annual reports of public enterprises. Of late, due to inadequate funding of statistics, major economic surveys were carried until 2005. Due to this and many other challenges that were being experienced in the economy, alternative methods based on using some proxy indicators have been adopted.
2.0 The Calculation of Gross Domestic Product 2000- 2005
2.1 Derivation of a weighted exchange rate
For 2005 the amount of goods imported using the official exchange rates and imported using parallel market exchange rate were used as weights for deriving unitary exchange rate. This rate was used to convert the 2005 current price GDP in the Zimbabwean Dollar terms to GDP in US dollar terms for that year.
2.2 Calculation of Gross Domestic Product
The detailed formula is described below:
· A weighted exchange rate was found using the following formula: 0.4* Official exchange rate + 0.6 * parallel exchange rate. The formula is adopted following the assumption that 40% of the transactions were done on the formal market and 60% were done on the parallel market.
· 2005 was used as a benchmark, so the weighted exchange rate for the year was used to divide the nominal GDP for the same year to come up with the GDP in US dollars
· To project backwards the following formula was used: *
Where y stands for the year, and k stands for constant.
This was done for all the years backwards
· For the years after 2005, the following formula was used:
*
This method assumes that the movement in the GDP deflator is the same as those in the unitary exchange rate. This in turn implies that the GDP deflation for the GDP in US dollar is one each year i.e. there is no GDP inflation in US dollars.
If the movements in CPI were equal to the movement to the GDP deflator then all the movements will be the same as movements in unitary exchange rates
If such a scenario arises where CPI movement is the same as movement of the GDP deflator and movement in unitary exchange rates, then there is no inflation in US dollar terms
3.0 Compilation GDP for 2009
3.1 Value added Tax Method
Value Added tax (VAT) is a fraction deductible from value addition. In Zimbabwe VAT constitute 15% of the taxable industries’ value addition. The total VAT collected for 2009 is equal to $370, 443,408.65
Therefore the total value addition for the industries is $370, 443,408.65*= 2,469,622,720
This figure was allocated proportionally to the contribution of each industry to VAT
Non taxable industries estimates were derived from recent surveys and production accounts as given in the account overleaf:
INDUSTRY / Normal Source of Data / PROPOSED SOLUTION1. Agriculture, Hunting and Forestry / a) Production Account of Agriculture, forestry and Fishing
b) Crop production on large scale commercial farms, c)Agricultural production on small scale commercial farms,
d)Agriculture and livestock on communal lands
c) Agricultural services,
d) Changes in herds communal and commercial, e)Net additions to capital stock in large scale commercial farms,
f) Production by Agricultural Estates,
g) Volume and value of livestock slaughtering and milk and butter fat prodn ,
h)Public Corporations GFCF (From Finance parastatal bodies summary) Central Govt. GFCF (From Finance GFS) / Recent Crop assessment data were used. This data was complimented with data from Tobacco marketing institutions. VAT data on agriculture services, forestry hunting and fishing was added to come up with the value addition for the whole industry.
2. Mining and Quarrying
/ a) Census of Industrial Production tables (final tables),b) Mineral production volume index (1990 = 100),
c) Value of mineral production,
d) Central Govt. GFCF (From Finance GFS) / In Zimbabwe almost all the minerals that are produced are exported the value addition should be close to the value of mineral exports. The value addition is 246,083,507 and the value of exports is 345,406,196 the difference between being intermediate consumption, 29% of gross output
3. Manufacturing
/ a) Census of Industrial Production tables (final tables),b) Index of volume of production of the manufacturing industries(1990=100) / Value added tax was used. Value addition was 496,936,835 plus around 20% informal sector
4. Electricity and Water
/ a) Census of Industrial Production tables (final), b) Electrical energy produced in Zimbabwe,c) Central Govt. GFCF (From Finance GFS), ZESA report for GFCF (Finance section) / Production accounts from ZESA holdings and Zimbabwe National water authority were used.
5. Construction
/ a) Census of Industrial Production tables (Prodn section)b) Construction work done by the public and private sectors (prodn sect)
c) B roll earnings ( from company returns) employment section,
d) Construction earnings (from employment section), e) Central Govt. GFCF ( From Finance GFS) / Percentage change in Imports for building and construction Material was used to project 2008 figure. The taxation data was very minimal
6. Distribution, hotels and Restaurants
/ a) Turnover figures from the taxes department (Prodn Section),b) Retail trade value index (Prodn Section),
c) Hotel bed occupancy ( migration statistics),
d) National Accounts questionnaire analysis( Output and GFCF),
e) Classification of functions of govt. (other economic activities, central, local),
f) Parastatal bodies Summary (Finance Section),
g) Central Govt. GFCF (From Finance GFS),
h) Census of Distribution (preliminary figures) / Tax data was used . Data for hotel occupants was readily available from ZTA be readily available
7. Transport and Communication
/ a) NRZ, PTC, AZ, figures (finance section parastatals summary), Load tonne Km NRZ for the above from Production section, Load tonne Km flown AZ for the above from Production section,b) CMED & Civil Aviation ( Finance section),
c) Consumer price index ( Code 17500),
d) Number of vehicles registered (production Section/Min. of transport), NRZ own account production ( Production Section),
e) PTC own production ( production Section), PTC earnings code 7200 (employment section), PTC revenue annual report ( Finance section),
f) National Accounts Questionnaire Analysis both output and GFCF,
g) Parastatal bodies Summary (Finance Section),
h) Central Govt GFCF ( From Finance GFS) / Taxation data was used.
8. Finance and Insurance
/ a) Report of the Commissioner of Insurance and Provident Funds(Min of Fin),b) Finance statistics report (Finance Section),
c) Imputed banking charges / Taxation data was used
9. Real Estate
/ a) Number of electricity connections from ZESA annual report,b) Rental income (estimated by national accounts),
c) Earnings from the employment section / Electricity new connections data was used
10. Domestic Services / Number of employees (all industries) from Employment section, / VAT data was used
11. Public Administration / a) Classification of Functions of Government figures from finance section,
b) Public Administration a) Earnings figures from Employment section,
b) Numbers employed in public administration,
c) Gross fixed capital formation (GFS Finance Section) / Data on industry employees and earnings from SSB was used, and also data on Governments Accounts
12. Education / a) Classification of Functions of Government figures from finance section,
b) Education Earnings figures from Employment section,
c) Numbers employed in Education,
d) Gross fixed capital formation (GFS Finance Section),
e) GFCF non profit making bodies ( Finance Section) / Government accounts data was used. VAT data was also used for private education institutions
13. Health / a) Classification of Functions of Government figures from finance section,
b) Earnings figures from Employment section,
c) Numbers employed in Health, Gross fixed capital formation (GFS Finance Section), GFCF non profit making bodies ( Finance Section), / Government accounts data was used. For private health institutions VAT data was used.
14. Other Services / a)Classification of Functions of Government figures from finance section,
b) Earnings figures from Employment section,
c) Numbers employed in other services,
d) Gross fixed capital formation (GFS Finance Section),
e) GFCF non profit making bodies ( Finance Section), Parastatal bodies Summary (Finance Section),
f)National accounts Questionnaire analysis (GFCF) / Vat data was used.
3.2 Rough Check on the validity of the GDP figure
Under normal circumstance the taxable industries constitute 53 % of GDP at factor cost
GDP at factor cost is therefore equal to 2,469,622,720 * = 4,659,665,509
If we add net the value of net tax which is 758,540,227
The figure comes to $ 5,366,048,433
3.3 Expenditure Tables
The figures are still very preliminary:
15. Private Expenditure
/ Income and Expenditure survey (ICES) andAs a residual / Calculated as a residual
16. Consumption Expenditure by Non Profit Making Bodies
/ Boosted Output figures from the survey results (Finance Section) / Data for the survey was used17. General Government consumption expenditure / a) Central Government intermediate consumption by commodity,
b) Local Government intermediate consumption total,
c) Fees sales and recoveries for both central and local government, / COFOG data was used
18. GCF / ICES data, Agriculture Production Account, CIP, COFOG / COFOG data was used for government. Imports of Building and construction materials will be used, car parts and plant and machinery as well
19. GFCF
/ ICES data, Agriculture Production Account, CIP, COFOG / Imports of Building and construction materials will be used, car parts and plant and machinery as well20. Changes in stock
/ GMB, oil refinery company, sugar refinery, tobacco sales floors, agriculture production account / Data was obtained from GMB, GMB, oil refinery company, sugar refinery, tobacco sales floors and changes in lives stocks were imputed21. Exports and Imports
/ Customs and Exercise dataReserve Bank BOP data / Customs and exercise data was used, BOP data was used
22. Property income paid and received from abroad
/ Reserve Bank BOP data / BOP data was used4.0 Calculation of CPI in United States Dollars
4.1 Introduction
The Central Statistical Office of Zimbabwe produces a consumer price index (CPI) and the month on month and year on year rates of inflation for the whole country once every month. The CPI is based on price observations from across the country covering both urban and rural outlets and weights obtained from the latest Income Consumption and Expenditure Survey (ICES)
As the economic situation characterized by hyperinflation deteriorated in 2007 and 2008 many products became scarce or unavailable in the country. The number of observations per month of the prices of the products used for computing the CPI similarly decreased. Under normal circumstances on average, close to 1500 observations of prices of all products were made every month. However, less than 500 observations per month were being made in the last half of 2008.
The period was also characterized by an increase in the number of domestic transactions that were conducted in foreign currency. This began unofficially, as parallel or black market activities, then there was a mixture of both official (some shops were licensed to sell in foreign currency) and unofficial domestic transactions in foreign currency, until early in 2009 all transactions were permitted to be conducted in foreign currency.
It thus became necessary to construct a CPI of transactions in foreign currency. Although the office had begun observing prices both in foreign and local currency from the middle of 2008, there were very few recorded observations of prices in foreign currency until December 2008 when a total of 283 observations were recorded.
This paper describes how the challenges of constructing a new foreign currency based CPI, without conducting an ICES and faced with having to start with a few products that were available and accommodating an increasing number of products as they reappeared in the market, were handled. The techniques employed were similar to those used when the number of products available in the market was decreasing.
The normal method of calculating the CPI and rates of inflation in Zimbabwe
(i) Index
Every month prices of about 385 products are observed from outlets across the country in both rural and urban areas. The work is organized by province and for each province a geometric mean price for each item is calculated every month. The mean price is calculated for those items for which there are matching observations of prices, outlet by outlet in the current and previous month. A geometric mean price ratio of current to previous month prices is also calculated for each item, each province. National weighted mean prices and weighted mean price ratios are calculated from the provincial mean prices and mean price ratios, respectively, using expenditure weights obtained from the ICES.
The Laspeyres formula is used for calculating the price index. The month on month rate of inflation is obtained by dividing the current by the previous month’s index and expressing the change as a percentage while the year on year rate of inflation is obtained by similarly comparing the figures for the current month with those of the same month in the previous year.
The calculation of the index is done at the lowest subclass level of aggregation. The class index is then obtained as a weighted mean of its subclass indices. The weight of the sub class is equal to the sum of the weights of the individual elementary aggregate items that comprise the sub-class.
We have
=