NSCB - 1st Quarter 2005 National Accounts - Technical Notes on the Estimates of the Philippine System of National Accounts (PSNA) Series 2004-Q4

NSCB Technical Notes on the Estimates of the
Philippine System of National Accounts (PSNA) Series 2005-Q1
(posted 11 August 2005)

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.

Data Sources

As of May 2005, some of the major data sources for the PSNA came up with revisions/refinements in their data series. The Bureau of Agricultural Statistics (BAS) revised their production data starting 2002. For 2002-2003, the Commission on Audit (COA) has a more detailed presentation of the government accounts based on their new accounting system.

The National Statistics Office (NSO) will revise the merchandise imports based on the NSCB Resolution No.8 Series of 2005, approving the interim methodology for the revision of electronics import statistics. Such revision will be reflected in the national accounts accordingly.

The Bangko Sentral ng Pilipinas (BSP) has a revised 2003-2004 Balance of Payments (BOP) to align it with the BOP Manual, 5th edition (BPM5). The BOP revisions likewise incorporated adjustments in the import statistics based on the initial findings of the Inter-Agency Committee on Trade Statistics (IACTS).

In the BOP revision, it is unfortunate that BSP decided to consider Overseas Filipino Workers (OFWs) who are out of the country for more than one year automatically as non-residents. The NSCB views such treatment as not reflective of the nature/peculiarities of our OFWs.

Treatment of OFWs in the PSNA

In the PSNA, considering the characteristics of OFWs a one-year residency criterion is applied to sea-based OFWs while a two-year cut off is adopted for the land-based OFWs. In defining residency, an institutional unit is said to be a resident of a country when it has a center of economic interest in the economic territory of the country.

Based on the 1993 SNA, paragraph 14.15 states that “a household has a center of economic interest when it maintains a dwelling or succession of dwellings within the country which members of the household treat and use as their principal residence. All individuals who belong to the same household must be resident in the same country...” Further, paragraph 14.14 affirms “the ownership of land and structures within the economic territory of a country is deemed to be sufficient in itself for the owner to have a center of economic interest in that country…”

Similarly, paragraph 14.16 states that “a member of a resident household who leaves the economic territory to return to that same household after a limited period of time (i.e., less than one year) continues to be a resident even if that individual makes frequent journeys outside the economic territory. The individual’s center of economic interest remains in the economy in which the household is resident…”

Moreover, paragraph 14.13 of the 1993 System of National Accounts (SNA) does not categorically specify a one-year period, “…the conduct of economic activities and transactions over a period of one year normally implies a center of interest, but the choice of any specific period of time is somewhat arbitrary and it must be emphasized that one year is suggested only as a guideline and not as an inflexible rule.”

Thus, OFWs continue to be treated by the NSCB as residents of the country since they continue to be members of resident households even if their contracts exceed the one-year residency criterion for the following reasons:

The center of economic interest of our OFWs is deemed to be still in the Philippines since most our OFWs send a greater part of their earnings for expenditures of their families, for the acquisition of their own house and lot, and for some, to invest in small businesses in the Philippines.
While it is true that the land-based OFWs are mostly covered by two-year contract, many of them come back to our country before their contract ends.
Many of them come back to the Philippines after their contract ends.

At present there is an on-going update of the 1993 SNA being undertaken by the Intersecretariat Working Group on National Accounts (ISWGNA) and one of the issues currently under discussion is the residence of households. The Draft Annotated Outline of the new BPM suggests the adoption of the principle of a “predominant” center of economic interest, which recognizes that individuals may have multiple centers of economic interest but should be classified to the territory with which they have the strongest connection. For this proposal the following factors may be taken into account in determining the predominant center of economic interest:

a permanent dwelling is maintained by the worker in their home country;
spouses and dependant family members remain in the home country;
substantial payments are made to family members remaining in the home country;
major saving and investment is conducted in their home country;
the period of validity of residence permits, work permits or work contracts;
the worker has a right to abode after a qualifying period;
where the labor income is taxed.

The ISWGNA through the United Nations Statistics Division (UNSD) is currently conducting a worldwide consultation among countries for this issue before a decision is made.

In the PSNA, estimates of compensation inflow under the net factor income from abroad follows the above residency criteria for OFWs; thus PSNA compensation differs from the compensation receipts of BOP. Likewise, current transfers in the income and outlay account of households of the PSNA differs from that of the BOP simply because of the difference in the treatment of OFWs. For travel exports/imports, the PSNA estimates are based on the data from the Department of Tourism (DOT). At present, the expenditures of resident OFWs in the host country and expenditures of non-resident OFWs in the Philippines are not yet directly included under travel imports/exports.

Population Figures Used in the Accounts

For per capita computation purposes, the population figures used in the present PSNA publication (as of May 2005) are population estimates based on the approved NSCB Resolution No.1 Series of 2005 calling for the adoption by all concerned of the methodology used in generating the 2000 census of population and housing-based national population projections and estimates thereof. In the absence of single calendar year projections, the 2001-2004 estimates were based on the annual average geometric growth rate of 2.07 percent.

Revisions as of May 2005

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, CPI, RPI and FTS; BSP on the BOP; the BAS, SRA, and NIA on Agriculture and Fishery, the Forest Management Bureau on Forestry; the DOE and MGB for Mining and Quarrying; the NPC for EGW; the NDCC for ODRE; DBM and DOF for Construction; COA for Government Consumption; as well as POEA for NFIA.

The revised annual and quarterly 3-year series (2002-2004) released last 16 June 2005 and 30 May 2005 respectively, incorporated the updates and revisions in the data sources of the PSNA. There were some data sources that revised their figures as far back as 2002 and the accounts were revised accordingly. However, these need to be linked with the earlier series (prior to 2002). Hence, the published levels in the three-year series are not linked with the earlier series. Work on linking the national accounts series is part of the on-going activities of the over-all revision of the Philippine System of National Accounts (PSNA), which is targeted for completion next year.

For the fourth quarter, the following revisions were made:

On the production side,

AFF was revised upward from 1.2 % to 1.4%
Mining and quarrying downward by 2.6% to 1.5%
Manufacturing upward from 6.9% to 7.4%
EGW upward from 3.9% to 5.2%
Trade upward from 5.6% to 5.8%
Finance upward from 7.8% to 8.0%
TCS downward from 13.3% to 9.6%
ODRE downward by 6.5% to 3.9%
Private services downward from 7.0% to 6.5%
Construction upward from 5.8% to 9.2%

On the expenditure side,

Construction was revised upward from 1.9% to 3.3%
NFIA upward from 7.0% to 8.7%
Government Consumption upward from 2.8% to 5.6%
Durable Equipment upward from 0.2% to 5.9%
PCE downward from 5.8% to 5.7%
Breeding Stocks downward from 7.2% to 1.2%
Exports downward from 14.1% to 11.2%
Imports downward from 8.3% to 5.8%.

As a result of all the revisions for the fourth quarter, GDP growth for Q4 2004 remained at 5.4% while GNP growth was revised upward from 5.5% to 5.6%. For the whole year, GDP remained the same at 6.1% and GNP was revised upward from 6.1% to 6.2%.

A more complete tabulation of our revisions is included in our publication (as of May 2005).

Errata –

The NSCB will issue errata on the estimates for the agriculture sector and the income and outlay account for government corporations. For the Agriculture, Fishery and Forestry sector the corrected estimate posted a decline of 0.2 percent instead of the published 0.1 percent. Correspondingly, the Gross Domestic Product grew by 4.5 percent compared to the published growth of 4.6 percent while the Gross National Product grew by 4.6 percent instead of the published 4.7 percent. The public will be advised accordingly through our website.

For inquiries please contact Dir. Raymundo J. Talento at (632) 895-2481 or
e-mail him at rj.talento@nscb.gov.ph.

References:

Issues Paper Balance of Payments Technical Expert Group (BOPTEG) #8 Residence of Households by Robert Dippelsman, IMF Statistical Department, May 2004 (http//www.unstats.un.org).

Issues Paper Balance of Payments Technical Expert Group (BOPTEG) #8A Residence of Households by International & Financial Accounts Branch, Australian Bureau of Statistics, May 2004 (http//www.unstats.un.org).

System of National Accounts 1993, by Eurostat, IMF, OECD, U.N., WB, 1993.

Technical Notes on the 2003-2004 BOP Revisions by Bangko Sentral ng Pilipinas, April 2005 (http://www.bsp.gov.ph)