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.

Gross Domestic Capital Formation –

In the PSNA, Gross Domestic Capital Formation (GDCF) consists of two major components: (1) gross fixed capital formation (GFCF) and (2) changes in stocks.   Gross fixed capital formation covers the expenditures on construction, durable equipment, and breeding stocks, orchard development and afforestation.  Construction was discussed in the NSCB Technical Notes on the Estimates of the PSNA Series 2003 - Q3 while Durable Equipment was tackled in the NSCB Technical Notes on the Estimates of the PSNA Series 2006 - Q3. The remaining items under GDCF are discussed below:

Breeding Stock, Orchard Development and Afforestation -

The outlays on animals reared for breeding, sport or entertainment purposes, as draught animals, diary cattle, layers, etc less disposal of these animals are included in this sector as breeding stocks.  Disposals cover not only those animals sold but also those slaughtered by their owners.

Orchard development includes expenditures on cultivation of trees, shrubs, etc. in plantations for the products they yield continuously over long periods of time.  Trees grown for timber and yield a product only once when they are ultimately felled are not part of capital formation.¹

Afforestation covers the expenditures for activities such as clearing and planting of forest tress to create new forest areas.  This includes the expenditures of both the government and private sector for afforestation activities.

Changes in Stock –

This refers to the difference between the ending and beginning inventories. Stocks or inventories are goods produced or purchased but not yet used or sold during the accounting period and it consist of the following:

1. raw materials – goods purchased by the producer that are intended to be use as intermediate inputs in their production activity;
2. work-in-progress – goods which are already processed but not yet completed;
3. finished goods – goods produced as final output that are ready for sale or delivery but not yet sold.

Operationally, issues arise in setting the boundary line between capital formation and changes in stocks as in the case of the work done in construction and that of the production of goods, which take a long period of time to complete such as heavy machinery and equipment.  In the case of construction, the value of construction put in place for the accounting period is treated as capital formation while the work done on the unfinished production of heavy machinery and equipment are considered as part of changes in stocks.

For agriculture, the treatment of livestock depends on the purpose for which the animals are raised.  Animals that are raised for slaughter hence for final consumption are included as part of stocks while those animals that are reared as draught animals, diary animals, layers, etc. are treated as part of capital formation.  At present, the livestock and poultry are not included in the estimate of changes in stocks due to data constraints in earlier years.  This is however, being considered in the revision of the PSNA. 

Additional note on the PSNA Link Series -

In addition to what was stated in the Technical Notes of the PSNA Series 2007-Q1, the revised annual and quarterly 3-year series (2001-2003) released in May 2004 are not linked with the series from 2000 backwards with the revised estimates for GOCC’s based on the latest data sets.

Q3 2007 Contribution To Revisions
as of January 2008

Based on the Revision Policy approved by the NSCB Executive Board and consistent with the international practice on the revision of National Accounts, we are reflecting the corrections and revisions in our previous estimates, based on the revisions and updates made by the data sources themselves, including those made by National Statistics Office (NSO) on Exports, Imports, Monthly Integrated Survey of Selected Industries (MISSI) and Quarterly Survey of Philippine Business and Industry (QSPBI); Bangko Sentral ng Pilipinas (BSP) on the Balance of Payments (BOP); Department Of Tourism (DOT) on Tourist Receipts; Department Of Energy (DOE)  for Mining and Quarrying, Manufacturing and Changes in Stocks; Cebu Pacific and Philippine Air Lines (PAL)  for Transportation, Communication and Storage (TCS); Department of Budget and Management (DBM) for Government Services and Government Consumption Expenditure; Philippine Overseas and Employment Authority (POEA) for Net Factor Income from Abroad (NFIA); Manila Water Company Incorporated (MWCI) and Manila Water Services, Incorporated (MWSI) for Electricity and Water (EGW) and Perconal Consumption Expenditure (PCE); and Bureau of Agricultural Statistics (BAS) and Forest Management Bureau (FMB)  for Agriculture, Fishery and Forestry (AFF), Breeding Stocks and Changes in Stocks.

For the third quarter, the largest contributor to the revision was Trade, which contributed 0.43 percentage point.  Other major contributors to the revision on the production side came from:

         a)       Government Services with 0.09 percentage point;
         b)       Manufacturing with 0.07 percentage point;
         c)       Construction and Finance, each with 0.06   
                   percentage point;
        d)        Agriculture and Fishery with 0.03 percentage
                   point.      

On the other hand, the following were revised downward and made negative contributions to the revision of GDP:

       a)         TCS, with negative 0.04 percentage point; and
       b)         EGW with negative 0.003 percentage point

Meanwhile, NFIA was revised downward and contributed a negative 0.08 percentage point to the GNP revision.

As a result of all the revisions for the third quarter, GDP growth was revised upward by 0.8 percentage point from 6.6% to 7.4% while GNP growth was revised upward by 0.6 percentage point from 8.2% to 8.8%.  A more complete tabulation of our revisions is included in our publication.

The last time the GDP growth was revised upward by as much as 0.8 percentage point was in November 2003 when Q2 2003 GDP estimate was revised from 3.2 percent to 4.0 percent. 

[In the case of GNP, the last time upward revision by as much as 0.6 percentage point was made in May 2006 when Q1 2006 GNP estimate was revised from 5.8 percent to 6.5 percent.]

For inquiries please contact:

Dir. Raymundo J. Talento
Economic Statistics Office
National Statistical Coordination Board

Tel. No. (632) 895-2481
E-mail: rj.talento@nscb.gov.ph

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¹ Paragraph 10.83, 1993 System of National Accounts