Economic Commission for Africa

UNITED NATIONS

ECONOMIC COMMISSION FOR AFRICA

Expert Group Meeting to review the “Handbook on Supply and Use Table: Application and Good Practice”

24-28 October 2011, Addis Ababa, Ethiopia

Comment

Liv Simpson

Norway

General comments and suggestions. Chapter 7. Balancing supply and use

By Liv Hobbelstad Simpson.

PART 1. General comments

1. Why SNA 1993 and not 2008 SNA

2. National Accounts with Supply and Use Tables (SUT)

3. Statistical classifications for National Accounts with SUT

3.1 Classification for Output, Industries and Products

3.2. Classification for Final domestic expenditure

4. Data sources for National Accounts with SUT in current prices

PART 2. Chapter 7. Balancing supply and use

1. Balancing the current price SUT at purchasers’ prices or at basic prices?

2. The compilation process for SUT at current prices

3. Comments to: An example of manual balancing for the commodity garments

4. Comments to another example – advertising services

5. Comments to automatic balancing.

PART 1. General comments

1. Why SNA 1993 and not 2008 SNA

In most regions, advisory groups on national accounts and economic statistics have been set up, formulating regional implementation programmes for the 2008 SNA and the supporting statistics. These regional programmes are aligned with the global implementation programme for the 2008 SNA, covering three stages for the implementation of the 2008 SNA through a multi-year programme:

A drafted plan for milestones for the implementation of the 2008 SNA, presented at the 41 session of UN Statistical Commission’s meetings, New York 22.-25 February 2011, is following the same sequence as the milestones for the implementation of SNA 1993.

The ISWGNA prepared the following table on 2008 SNA implementation milestones to the 42nd session of the United Nations Statistical Commission (UNSC) in February 2011:

Implementation
Milestones / Complementary
Data systems
Pre-SNA phases / Basic data on production, turnover, consumption, exports and imports. Consumer and producer price indices. Balance of payments goods and service account Monetary survey statistics
Milestone 1:
Basic indicators of gross domestic product (GDP)
Final expenditures on GDP current and constant prices
GDP by industry at current and constant prices / Supply and use table worksheets
Balance of payments: current, capital and financial accounts
Government finance statistics (GFS) transaction accounts

The African Development Bank (AfDB), the African Union (AU) and the UN Economic Commission for Africa (UNECA) has established an African Group on National Accounts (AGNA) to foster the implementation of the 2008 SNA in Africa. The AGNA has prepared a ‘Draft African Strategy for the Implementation of the 2008 SNA’. The implementation of 2008 SNA is also followed up by training workshops, seminars and regional meetings.

2. National Accounts with Supply and Use Tables (SUT)

For some countries, Supply and Use Tables (SUT) are fully integrated in the National Accounts system and serve both statistical and analytical purposes. Others finish SUT and also IOT after the final National Accounts aggregates are published.

For developing countries, the balancing of the Supply and Use Tables is of particular importance for compiling National Accounts. The compiler can then use judgement to reach a balance by adjusting the components as necessary. Several developing countries are using SUT as an integral part of the compilation of final annual National Accounts at current prices. They are also used as the framework for balancing National Accounts and compiling National Accounts aggregates. Some countries are also compiling SUT in previous year’s prices.

3. Statistical classifications for National Accounts with SUT

3.1 Classification for Output, Industries and Products

• Domestic output should be classified into three main types:
• Market output - mainly goods sold at “economically significant” prices.
• Production for own final use (which is non-market output by definition).
• Other-non-market production is that supplied to other units either free or at prices that are not economically significant. This covers General Government and NPISHs.

NOTE: The non-observed economy (NOE) in SNA overlaps with, but is not the same as the ILO concept of the informal sector.

Many countries have revised the classification used in registers and the economic statistics to introduce the new International Standard Industrial Classification (ISIC) Revision 4.The industry classification used in the Supply Table and the Use Table must also be changed accordingly to a SUT NA-ISIC adapted aggregation of ISIC Rev. 4, relevant for the developing country.

The product classification used in the Supply Table and the Use Table must also be changed from the Central Product Classification (CPC) Version 1.0 from 1998 to the SUT NA-CPC adapted aggregation of CPC Version 2.0, relevant for the country. Countries who introduce SUT for the first time should start with the new classifications.

3.2. Classification for Final domestic expenditure

The following classifications for the expenditure approach should be integrated in the National Accounts SUT compilation:

• COICOP classification for household consumption expenditure
• COFOG classification for government final consumption expenditure
• COPNI classification for final consumption expenditure of the non-profit institutions serving households (NPISHs)
• Gross fixed capital formation by type and industry.

4. Data sources for National Accounts with SUT in current prices

In a developing country, all economic statistics and also relevant data sources from different government ministries should be used for the national accounts/SUT compilation.

Important data sources are:

Agriculture statistics and agriculture census. Livestock censuses

Fisheries statistics

Banking statistics and statistics for other financial institutions

Annual Economic Survey for large enterprises or for a sample of enterprises

Government Audited Accounts and Budget Documents

External trade statistics with value and quantity data for imports and exports of goods

Integrated Household Survey or Household Budget Surveys

Consumer price indices

Population Census,

Housing Census

PART 2. Chapter 7. Balancing supply and use

1. Balancing the current price SUT at purchasers’ prices or at basic prices?

Supply and Use Tables is of particular importance for compiling National Accounts. The compiler can then use judgement to reach a balance by adjusting the components as necessary. Several developing countries are using SUT as an integral part of the compilation of final annual National Accounts at current prices. They are also used as the framework for balancing National Accounts and compiling National Accounts aggregates. Some countries are also compiling SUT in previous year’s prices or a fixed year constant prices.

Ref. SNA 1993, chapter C. Supply and use tables, paragraph 15.57 and 15.58.

In general, when preparing supply and use tables and making the proper balancing between the two sides, there is a choice of emphasis between two opposite lines of adjusting statistical data:

(a)Supply of each product at basic prices could be adjusted to a purchasers’ prices valuation to allow balancing with uses at purchasers’ prices.

OR

(b)Each of the uses at purchasers’ prices could be adjusted to a basic prices’ valuation to match with supply at basic prices.

In practice, both types of balances may be needed in the process of building up a supply and use table.

It is not possible to know the columns of value added tax (VAT) and other taxes on products, subsidies on products and trade and transport margins broken down by products in the Supply table unless the distribution among uses of individual products are known from the Use table.

Important argument for first to balance SUT in Basic values:

• Many African countries have introduced Value added tax (VAT) where only non refundable VAT should be recorded in the Use table, mainly for products to Household consumption.
• Product subsidies may only be given to some users of a product.
• Product taxes may not be paid by some users as for products to export.
• Depending on how detailed the product specification is, the trade margin can be higher for a product used for private consumption than for intermediate consumption by industries

Value added tax (VAT) is a tax on products, which producers are required to charge on the goods and services they sell. This is because they are usually permitted to deduct the VAT that they themselves have paid on goods and services purchased for their own intermediate consumption or gross fixed capital formation. Producers are obliged to pay only the difference between the VAT on their sales and the VAT on their purchases.

In the national accounts VAT is treated as being paid by final buyers.

Estimates of VAT are calculated as the sum of:

• VAT paid by households as final consumers;
• VAT paid by general government;
• VAT paid on capital expenditure by industries producing tax exempt goods and services;
• VAT paid on intermediate purchases by industries producing tax exempt goods and services.

SNA 93, paragraph 15.129 The supply and use table at basic prices are also a step forward to the conversion towards input-output tables in basic values.

SNA 93, paragraph 15.161 The supply and use tables in basic prices are the most complete consistent framework for constant price estimation.

2. The compilation process for SUT at current prices

For estimating the Household consumption figures, the results from the Household Budget Surveys have to be evaluated and compared or balanced with other data sources used for the balancing of supply and use of goods and services.

Detailed data for imports and exports of goods and services are of great importance for the National Accounts and SUT compilation in developing countries. The detailed specification of import by products give important information about the supply of many products not produced in the developing country.Eurostat has developed the EUROTRACE software package used by many countries in Africa to manage data for external trade statistics

3. Comments to: An example of manual balancing for the commodity garments

Supply/Use / Unbalanced estimates / Balanced estimates
Domestic production at basic prices / 48,920 / 83,287
Imports at c.i.f values / 145,770 / 145,770
Transport costs / 5,841 / 5,841
Trade margins / 74,345 / 74,345
Product taxes / 21,990 / 21,990
Subsidies / 0 / 0
Total supply / 296,776 / 331,233
Intermediate consumption / 0 / 0
Government final consumption expenditure / 570 / 570
NPISH final consumption expenditure / 4,230 / 4,230
Household final consumption expenditure / 291,175 / 279,528
Gross fixed capital formation / 0 / 0
Change in inventories / -75 / -75
Exports at fob values / 46,980 / 46,980
Total uses / 342,880 / 331,233

This example is misleading.

Garments can not be supplied direct to Government and NPISHs final consumption expenditure.

In accordance with SNA93 and 2008SNA, the value of output of services from general government and for NPISHs has to be calculated as the sum of the expenditure components: intermediate consumption, consumption of fixed capital and compensation of employees.

For the general government, on the output side, gross output is equal to the sum of the government fees (sales of goods and services) and government final consumption expenditure (the residual),

classified by COFOG groups. For the NPISHs final consumption expenditure is classified by COPNI.

Estimation of intermediate consumption by products for the government is also difficult, as the government accounts normally do not provide a standardised breakdown of purchases of goods and services.

4. Comments to another example – advertising services.

The following is written: The only product taxes are value added taxes. These must have been paid by households because enterprises do not pay VAT on intermediate consumption and NPISH do not pay VAT either.

Comment: The Government accounts will only give information about total value added tax received during a budget year, but not specified by type of products as for advertising services.

5. Comments to automatic balancing.

The Supply table is shown as a matrix of domestic production with 3 three products (commodities) and three industries (kinds of activity).

My experience with RAS

RAS should only be used at a final stage of the balancing of SUT and only for a final correction of the