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Statistically Speaking
Towards Improved Measures of GDP! 
by Dr. Romulo A. Virola 1
Secretary General, NSCB
Did you notice that during the Simbang Gabi novenas three weeks ago, the church was more full than last year? And last Saturday, during the annual procession of the Feast of the Black Nazarene in Quiapo, an estimated two million2 devotees participated, roughly half a million more than last year. Some think that Ondoy, Pepeng, and other natural disasters cause Pinoys to be more religious but it seems that the same phenomenon had been observed in other countries. For instance, in London, vicars had reported swelling numbers of worshippers. In their case, it is supposed to be anecdotal proof that bankers who had contributed to the global crisis were now seeking salvation, wanting now to do a good job3! Just right, one may say, because greed just cannot be good for our souls.
And with the economic emergence in the last decade of China and India, some say power has shifted eastwards and predict that we are now into the Asian Century, after the Americans and the British have had theirs. About time! Asians, let us unite!
Moreover, in our century, they say that children born after the year 2000 in developed countries will most likely live to be 100! Copenhagen may have failed, but could this be due to climate change as well? Whatever, whichever, business decisions might be obvious because close to the year 3000, the Belo kind of business will prosper and proliferate. DIs or Attorneys will enjoy their hay days. And Viagras will sell like hotcakes!
Are the above facts, or fancy? Surely, good quality statistics will help us find out. That is why we statisticians, yes, we statisticians, must always be alert for opportunities for us to be relevant to society!
One area where we in the NSCB in particular, and in the Philippine Statistical System (PSS) in general, are focusing attention towards generating good quality statistics is in the Philippine System of National Accounts (PSNA).
The PSNA of course has problems. It has an embarrassingly outdated base year, it is not able to completely capture all economic activities like smuggling and many productive endeavours in the informal sector, some parameters remain unupdated, the data support sometimes shows incoherent, inconsistent results, etc., etc. Those who truly understand the compilation of national accounts of course can sympathize with some of these problems, but we, the national accountants of the NSCB recognize our weaknesses and limitations and more importantly, our responsibility to our stakeholders, so we continue to try our best to improve our estimates of the Gross Domestics Product (GDP)! Honest!
A major concern of national accountants now is to migrate to the 1993/2008 System of National Accounts (SNA). Since the official start of national accounting with the 1953 SNA, three revisions have been made on the international guidelines – 1968, 1993 and 2008. As far as we know, most developing countries are still essentially following the 1968 SNA, but many developed countries like Australia and Canada have successfully implemented most of the 1993 SNA recommendations.
Revisions4 of the international guidelines on national accounting and of the compilation of national accounts by countries are necessary for a number of reasons: changes in the way economies work (growing importance of services and improving quality of products and services), changes in economic regimes (high inflation in the 1970s and 1980s), increasing sophistication of users and their information demands, need for greater harmonization with other economic frameworks, international comparability of GDP estimates, changing views on the economy (expansion of the asset boundary), etc. And as we implement these revisions, let me assure you, cheating is never on our mind!
In the case of the Philippines, our efforts to implement the 1993 SNA started more than ten years ago. We have benefited from the assistance provided by the Asian Development Bank, the Philippine-Australian Government Facility, and most recently, the World Bank, under which the focus is on the rebasing and linking of the national accounts series. Our national accountants in the NSCB have of course benefited too from various training opportunities thru the support of partners like the United Nations Statistics Division, the Statistical Institute for Asia and the Pacific, our very own Statistical Research and Training Center, the International Monetary Fund (IMF), the ESCAP Statistics Division, the ASEANstats, the government of Japan, Statistics Canada, Statistics Sweden, Australian Bureau of Statistics (ABS), the US Bureau of Economic Analysis and others.
One of the key recommendations in the 1993 SNA is the use of chain volume measures in lieu of the constant price estimates under the 1968 UNSNA. Basically, this involves changing the base year every year.
Thus, more than ten years ago, the NSCB started work to shift to chain volume measures. With the help of our consultants from the ABS, we did computational exercises and produced chain volume estimates. We also wrote and presented a number of papers5.
In the course of these efforts, we realized that the price indexes we needed to 
be able to do fairly reliable and reasonable Chain Volume Measures were not yet being produced or could not be produced by the PSS in the near future. We therefore decided that the practical approach to take to improve the volume (real) estimates under the PSNA was to update the base year.
In 2000-2001, we participated in the ADB-UN ESCAP Workshops on Rebasing and Linking National Accounts Series in Bangkok where we presented two papers6. In this workshop one of the recommendations was for 
participating countries to try to rebase their national accounts using 2000 as a common base year. Accordingly, the PSNA will be rebased to 2000 from the previous 1985 base year. It is common knowledge of course, that whenever rebasing is done, “history is being rewritten”. Thus, users of the national accounts must be aware of the repercussions of changing base years.
Relatedly, the NSCB has issued a number of Resolutions7 to address the issue of rebasing of price indices. The latest of these resolutions calls for the synchronized rebasing of price indices to Base Year 2006.
Meanwhile, the NSCB lost a number of its national accountants and other key personnel to the Bangko Sentral ng Pilipinas (BSP), the Asian Development Bank (ADB), the ASEAN Secretariat, and the private sector. After Executive Order 366 was issued, we also lost some staff to other government agencies, who we could not replace unless an exemption was granted by the Department of Budget and Management (DBM). Thus, our national accounts office is now down to 18 staff from at least 40 up to year 2005.
The severe manpower constraints faced by the NSCB have delayed many of our PSNA improvement plans. We also could not implement a number of practical and very good recommendations from advocates of good statistics like Dr. Gerardo Sicat and Dr. Gonzalo Jurado, not to mention our very diligent, persistent but constructive critics Prof. “Mareng” Winnie Monsod and Gov. Joey Salceda.
But thanks to the World Bank, especially the enthusiasm and overwhelming support of Karl Kendrick Chua, we are moving forward8. Last 18 December 2009, we conducted a Consultative Forum on the Revised/Rebased National Accounts of the Philippines to present the very preliminary estimates for the revised/rebased annual series for 1998-2008 and to seek advice for their improvement. Unfortunately, some key stakeholders were not able to participate in that forum. Recognizing the importance of wider consultation on the matter before we finalize our estimates, we are grateful to the Philippine Institute for Development Studies President Jop Yap and the World Bank for agreeing to jointly sponsor a second forum to be held on Wednesday, 13 January at the NEDA sa Makati, Amorsolo St. Legaspi Village, Makati City at 1:30 p.m. Anyone interested to attend can contact Regi Reyes or Ruben Litan at tel. no. 8955002 or 8909405.
In this regard, we acknowledge the cooperation and support of our partners in the PSS, particularly the data sources, on whom the quality of the PSNA estimates very much depends. Surely, the PSNA estimates could not be released on time nor with the desired quality without the full cooperation of the National Statistics Office (NSO), the Bureau of Agricultural Statistics (BAS), the BSP, the DBM, the Department of Tourism (DOT), the Mines and Geosciences Bureau (MGB), Commission on Audit (COA), and many other government offices, as well as the data providers from the private sector including households. Thank you to all of you!
The revision and rebasing of the PSNA estimates have the following implications:
In current prices, the new GDP level and the sectoral Gross Value Added (GVAs), as well as the expenditure estimates will be revised/improved to reflect various changes as a result of the following:
In constant prices, the new GDP level and the sectoral GVAs, will be expressed in 2000 prices. Thus, in general the new levels of the constant price estimates will be higher.
The growth rates will also be revised depending on the revisions in the levels from year to year. In the case of constant price estimates, the theory is that in changing the base year to a more recent period, the new growth 
rates for years prior to the base year will be higher, and lower for years after the base year. This has been empirically established in countries that have done comprehensive studies on the subject like Australia. Thus, in principle, rebasing the PSNA from 1985 to 2000 would result in general, in a historical underestimation of growth rates of constant price estimates prior to 2000 and overestimation after 2000.
In terms of presentation of the estimates, emerging industries and commodities will be highlighted (to 
come out in the PSNA publication). This includes:
While the initial revised/rebased estimates are still very preliminary and very much work-in-progress, the following observations may be made:
The estimates from the production side and from the expenditure side will show a statistical discrepancy of zero for the base year 2000, and hopefully will be very close to zero for other years.
The structure of the economy has changed. The diminution of 
manufacturing and the shift to services will be reflected in the revised estimates.
The revised estimates will show an expanding share of construction during the last five years.
After the forum this Wednesday, future activities include:
Meanwhile, the May elections have made many people busy, particularly the politicians and the pollsters. Some are nervous, others are making money, but us, ordinary citizens, we have only one choice. We must vote for the right candidates! For good governance, for dedicated, inspiring and inspired leadership, for our brighter future! Happy Year of the Tiger to all!
Reactions and views are welcome thru email to the author at ra.virola@nscb.gov.ph.
________________
1 Secretary General of the National Statistical Coordination Board (NSCB) and Chairman of the Statistical Research and Training Center (SRTC). He holds a Ph. D. in Statistics from the University of Michigan in Ann Arbor, U.S.A. and has taught mathematics and statistics at the University of the Philippines. He is also a past president of the Philippine Statistical Association. The author thanks Noel S. Nepomuceno, Raymundo J. Talento, Regina S. Reyes, Vivian R. Ilarina, Cynthia S. Regalado, Jessamyn O. Encarnacion and Candido J. Astrologo, Jr. for the assistance in the preparation of the article. The views expressed in the article are those of the authors and do not necessarily reflect those of the NSCB.
2 Business Mirror, page A8, January 10, 2010. The Philippine Daily Inquirer reported that police estimate was as many as 4 million devotees., http://newsinfo.inquirer.net/breakingnews/metro/view/20100111-246670/
3 Of Greed and Creed, by Patrick Jenkins. Business World, S3/1, December 28, 2009.
4 Reference may be made to the presentation materials during the Consultative Forum last 18 December 2009 made by Raymundo F. Talento, Vivian R. Ilarina and Ma. Fe M. Talento.
5 Introducing Chain Volume Measures in the Philippine System of National Accounts (by Romulo A. Virola, Estrella V. Domingo & Minerva D. Martin), 2001 National Convention on Statistics; Enhancing the Relevance of the Philippine System of National Accounts ( by Romulo A. Virola & Estrella V. Domingo), 2002 Users’ Forum on the Adoption of the 1993 SNA; and The Use of Chain Volume Measures in Monitoring the Contribution of the Insurance Industry to the Philippine Economy (by Romulo A. Virola), 2002 Annual Convention of the Actuarial Society of the Philippines.
6 Rebasing, Linking, and Constant Price Estimation of the National Accounts of the Philippines ( by Romulo A. Virola, Estrella V. Domingo & Vivian R. Ilarina) and Updating the National Accounts Series of the Philippines (by Romulo A. Virola & Estrella V. Domingo)
7 SAB Resolution No. 4 of 1985, NSCB Resolution No. 6 Series of 1991 and NSCB Resolution No. 2 Series of 2009.
8 We also thank our consultants, Charles Aspden and Corazon R. Buenaventura for their guidance and retired NSCB officials Estrella V. Domingo and Andrea Morales for their support.
Posted: 11 January 2010.
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