NSCB - Second Quarter 2004 National Accounts - Technical Notes on 2nd Quarter 2004 Estimates Series 2004-Q1

NSCB Technical Notes on the Estimates of the Philippine System
of National Accounts (PSNA) Series 2004-Q2
(Posted: 25 October 2004)

Technical notes on the PSNA are regularly published in the NSCB website for a better appreciation of our national accounts. Reference should also be made to the earlier technical notes for the current national accounting practices adopted in the Philippines.

Indicators Derived from the National Accounts

Table 14 of our publication presents a set of indicators basically derived from the national accounts estimates. Some of the indicators are self-explanatory while others may need some descriptions for the users to better appreciate these indicators. The latter set of indicators is briefly discussed below.

1. Labor Productivity – refers to the quantity of output produced per unit of labor input and is an indicator to monitor the efficiency of labor relative to GDP. It is computed as the GDP at constant prices divided by the total number of hours worked. Hours worked refer to the total number of hours actually worked in all the jobs/businesses held. It includes the duration or the period the person was occupied in his/her work, including overtime, but excluding hours paid but not worked.

2. Terms of Trade – is the ratio of export price index to the import price index. It measures the changes in the prices received for exports relative to the prices for imports.

3. Trading Gains/Losses – GDP at constant prices is GDP in the current year valued at the base year and essentially a volume measure of the output from domestic production. However, the total real income which the residents derive from domestic production depends also upon the rate at which exports were traded against imports from the rest of the world. If the prices of a country’s exports rise faster than the prices of its imports, i.e., if its terms of trade improve - less exports are needed to pay for a given volume of imports so that at a given level of domestic production, goods and services can be allocated from exports to consumption or capital formation. Real Gross Domestic Income (GDI) is a measure of the real purchasing power of the income generated by domestic production so that when terms of trade change, there may be a significant difference between the movements of the GDP at constant prices and real GDI. Thus, Real GDI is expressed as:

ReaI GDI = GDP (at Constant Prices) + Trading Gain (or –Trading Loss) resulting from changes in Terms of Trade.

Therefore, Trading Gains/Losses refer to the difference between the real Gross Domestic Income (GDI) and the GDP at constant prices:

Trading Gains/Losses = ReaI GDI - GDP (at Constant Prices)

Trading gains/losses is computed as the difference of exports and imports at current prices deflated by the average Implicit Price Index (IPIN) of exports and imports less the difference of exports and imports at constant prices. Thus, Trading gains/Losses are estimated using the following:

4. Trade Balance – is the value of all the goods and services that are sold to other countries (exports) less the value of all the goods and services that are bought from other countries (imports). It is also called Net Exports. If the Net Export is positive, it means that the economy has a favorable balance of trade. If the net export is negative, it means that the country is running a deficit in the balance of trade.

5. Investment Ratio – is computed as the value of Fixed Capital Formation, at current prices divided by GNP at current prices. It measures how much capital (domestic and from the rest of the world) is infused in the economy to finance the development process. A similar ratio can be computed as: Fixed Capital Formation/GDP.

6. Ratio of NFIA to GNP – measures the share of the Net Factor Income from Abroad (NFIA) to the total income of the country, which accrues to the residents of a country irrespective of whether the source of such income is at home or abroad. NFIA consists of: (a) net compensation of employees, and (b) net income from property and enterpreneurship (interest, rent, dividends and profit). “Net” stands for the factor income received by residents less the factor income paid to residents.

7. (Export - Import)/GDP - this indicator provides some measure of the capacity of a country to service its imports through export earnings.

8. (Export + Import)/GDP – measures the degree of openness of the economy as well as the country’s dependence on other economies. An open economy is one that allows the trade of goods and services across its borders.

9. PCE/GDP – measures the share of households and Non-Profit Institution Serving Households (NPISH) consumption expenditure to total domestic production. This indicator shows how much of the total goods and services produced in the economy is consumed by the households and NPISH.

10. Tax Effort – is the ratio of total taxes, direct and indirect, to the GNP at current prices. It measures the capability of the government to generate tax revenues to support the development needs of the economy.

11. Debt Service/GDP – provides a measure to assess the country’s obligation payments relative to the income generated in the economy. The higher the ratio, the greater is the income that is spent to service the debt. Debt service refers to the payment of interest and principal required on the national government debt in a given period of time.

Revisions as of August 2004

Based on the Revision Policy approved by the NSCB Executive Board and consistent with the international practice on the revision of National Accounts, the following are the revisions in our previous estimates, based on the revisions and updates made by the data sources themselves, including those made by NSO on Exports, Imports, MISSI, QSPBI, Building Permits, WPI and RPI; BSP on the BOP; the BAS on Agriculture and Fishery, the Forest Management Bureau on Forestry; Mines and Geosciences Bureau and DOE for Mining and Quarrying; MWCI and NPC for EGW; DOF for Construction; DBM for Government Services and POEA for Net Factor Income from Abroad.

For the first quarter, the following revisions were made:

On the production side,

AFF was revised upward from 7.7% to 8.1%
Mining and quarrying upward from 21.0% to 21.8%
Construction upward from 6.5 % to 9.3%
Finance upward from 6.9 % to 7.0%
ODRE upward by 3.6% to 4.0%
Manufacturing downward from 4.3% to 3.9%
EGW downward from 5.4% to 5.1 %
TCS downward from 9.3% to 9.2%
Trade downward from 6.9% to 6.7%
Private services downward from 6.6% to 6.5%
Gov’t Services downward from 2.6% to 2.3%

On the expenditure side,

Construction upward from 3.7% to 8.3%
Durable equipment upward from 5.8% to 8.9%
Exports upward from 10.0% to 11.1%
NFIA upward from 3.3% to 6.7%
PCE was revised downward from 5.9% to 5.7%
GCE downward from 2.2 % to 0.9%
Imports downward from 4.9% to 4.3%

As a result of all the revisions for the first quarter, GDP growth for Q1 2004 was revised upwards from 6.4% to 6.5% and GNP growth was revised upwards from 6.2% to 6.5%. A more complete tabulation of our revisions is included in our publication.

For inquiries please contact Dir. Raymundo J. Talento at (632) 895-2425 or e-mail him at rj.talento@nscb.gov.ph.