E4/REG/2005/22

/ EUROPEAN COMMISSION
EUROSTAT
Directorate E: Agriculture, fisheries, Structural Funds and environment statistics
Unit E-4: Regional accounts /

Working Party on “Regional and Urban Statistics”
Meeting of 17-19October 2005 in Luxembourg,
BECH building, room AMPERE

Document E4/REG/2005/22

Real growth rates of regional GDP

European Commission, L-2920 Luxembourg. BECH building

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E4/REG/2005/22

Real growth rates of regional GDP

1.Background

In the framework of the Lisbon Strategy for improved competitiveness of the EU, Eurostat was requested in autumn 2004to provide real growth rates of regional GDP as an additional Structural Indicator at NUTS level 2.

Such growth rates had already been estimated before by DG REGIO, but the method used was generally considered not to be sufficiently precise. After a short discussion at the last Working Group it was agreed that Eurostat should pursue the matter, first by providing an overview of the current situation, and secondly by supplying a first set of data. It was understood that where NSIs calculate growth rates themselves, Eurostat should collect these and make its own estimatesonly for those Member States which donot.

2.Activities since the 2004 Working Party meeting

In November 2004 Eurostat circulated a short questionnaire in order to find out which NSIs were already calculating regional GDP or GVA growth rates, and on the basis of which information. The objective was to find out which NSIs werealready calculating growth rates and, if so, how many branch deflators they usedand whether or not they used regional price information.

It appeared that nine out of the 17 Member States with more than one NUTS level 2 region[1]were already calculating regional growth rates.Among these, the situation for Belgiumhas changed in the meantime. Growth rates were published until spring 2005 but then withdrawn, because the national deflator for general government was no longer considered sufficiently precise to be used for all regions.

The following eight Member States do not yet calculate regional growth rates: EL, IE, HU, AT, PL, SK, SE and UK, but four of them (EL, PL, SE and UK) are planning to do so in the future.

The calculations of regional growth rates are based on GVA figures at current priceswhich are subsequently deflated, usually with the help of national deflators.

As can be seen from the following table, the number of industries on which the NSIs base their calculations varies greatly between 17 in the CzechRepublic and 138 in Finland.

As regards deflators, all Member States except Spain and Italyuse national deflators only.

MemberState / Number of industries / Use of regional prices / Results published?
BE / 120 / No / Yes
CZ / A 17 / No / Yes
DE / A 60 / No / Yes
ES / 24 / Yes (A_B, F, services) / Yes
FR / 36 / No / Yes
IT / 30, (stratified by size for manufacturing) / Yes (services) / Yes
NL / 110 / No / Yes
PT / A 60 / No / Yes
FI / 138 / No / Yes

3.Eurostat estimates

For the nine (including Belgium) Member States which do not calculate or publish regional growth rates at the moment, Eurostat has made its own estimates. For Germany, where growth rates are available at NUTS level 1, Eurostat used the German NUTS level 1 values and estimated only NUTS level 2 data.

Eurostat estimates are based on two sets of data, both aggregated at an A6 branch breakdown:

1)Regional GVA data in current prices as transmitted by NSIs with Table 1000.

2)National GVA data at constant prices.

For every branch, national values of GVA at constant prices are divided by the corresponding values in current prices. FISIM and taxes are treated likewise. As a result we obtain specific deflators for each of the six branches as well as for FISIM and taxes.

These branch deflators are then multiplied by the regional GVA values in current prices, as received from the NSIs in table 1000. FISIM and indirect taxes are deflated as well.

As a result, we obtain for every region GVA values at constant prices for six branch aggregates plus deflated FISIM plus deflated indirect taxes; the total of these eight components is grossed up on the basis of the national GDP at constant prices from national accounts. As a result we obtain regional GDP values which add up to the national values from national accounts. On the basis of these values the growth rates are calculated.

Eurostat’s estimates as well as the calculations of the other eight Member States were uploaded onto New Cronos under the regional accounts data section in May 2005. In addition a NUTS level 2 map showing the growth rates 2002/01 was produced and uploaded onto the Structural Indicators section of the Eurostat website.

4.Accuracy and comparability of results

If we compare the above table of the NSIs’ calculations with the Eurostat estimates, it appears that NSIs’ calculations are clearly more precise, not only because of the higher number of industries, but also (in the case of Spain and Italy) due to the use of regional deflators. However, comparability is probably poor due to the wide variety of methods that are currently in place.

On the other hand, the simplified Eurostat estimates have the advantage of being more comparable, but the accuracy that can be achieved with A6 GVA data and national deflators is not sufficient in the long run.

As a result, the current data set is very heterogeneous as regards both accuracy and comparability. Obviously, such a state of affairs cannot be regarded as satisfactory.

5.Orientations for future work

The queries and feedback that Eurostat receives from users inside and outside the EU institutions clearly indicate that there is a strong demand for accurate and comparable data on real growth rates of regional GDP. The NSIs and Eurostat therefore need to make tangible progress in this area.

As the basic data available to Eurostat are not sufficiently detailed, a first objective should be for Eurostat to make estimations for as few Member States as possible. In order to achieve this,NSIs which do not yet make their own calculations should start up this operation as soon as possible.

At the same time there needs to be a sustained effort to achieve methodological convergence. In this context Eurostat proposes to pursue the discussion in the following two areas:

  • Level of detail of GVA data used:In order to improve comparability the number of industries of basic GVA data used should converge among NSIs.
  • Regional price information: Regional prices differences are very high in particular in services, which account for more than half of GVA in most regions of the EU.Recent experiences in Belgium confirm that the exclusive use of national deflators is not sufficient. TheNSIs and Eurostat should therefore explore the possibilities of using regional prices information for branches where this may yield substantially more accurate results. Eurostat suggests that this discussion should start by drawing on the experiences made in this field in Spain and Italy.

The Working Party is requested to express its view on this proposal.

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[1])For eight Member States the NUTS level 2 region is identical to the whole country (DK, EE, CY, LV, LT, LU, MT, SI), which means that the national real growth rates of GDP can be used.