The Present PSNA

The Philippine System of National Accounts (PSNA) generates macroeconomic indicator on Gross Domestic Product (GDP). The GDP represents the monetary value of all final goods and services produced within the economy in a given period of time.

The PSNA describes a comprehensive view of the country’s economic performance and allows to monitor the behaviour and structure of the economy. The PSNA covers the economic transactions that are recorded in summary tables and balance sheets called accounts. These accounts are summarized in integrated, coherent and consistent manner based on the internationally agreed standard concepts, definitions, classifications and accounting rules.

The national accounts compilation in the Philippines has a long history which started in 1947 when the Joint Philippine American Finance Commission undertook the preparation of the estimates for the years 1938 and 1948. In 1950, the Central Bank of the Philippines (CBP) took over and came up with the first national accounts series from 1946 to 1959.

In 1957, the national accounts work was passed on to the Office of Statistical Coordination and Standards (OSCAS) of the National Economic Council (NEC) on the ground that national accounts estimation and analysis would be useful in policy formulation, economic program development and the assessment work of the NEC.

In 1973, the reorganization of the government led to the creation of the National Economic and Development Authority (NEDA) as the successor of the NEC and continued the task of compiling the PSNA through its National Accounts Staff (NAS).

Improvement efforts continued until the government re-structuring of the Philippine Statistical System (PSS) took place in 1987. By virtue of the Executive Order No. 121, the Statistical Coordination Office was detached from NEDA and became the National Statistical Coordination Board (NSCB), which took over the task of compiling and maintaining the PSNA.

When the Philippine Statistical Act of 2013 was passed on September 2013 which established the Philippine Statistics Authority (PSA), as merged of the four (4) major statistical agencies, the compilation of national accounts become the responsibility of the PSA.

The System of National Accounts (SNA) helps economists to measure the level of economic development and the rate of economic growth, the change in consumption, saving, consumption, investment, debt and wealth of the economy. From the data of SNA, economists can either forecast the future growth of the economy or study impacts on the economy and the institutional sectors of identified government policies and programs.

The PSNA which generates macroeconomic aggregates, e.g. the Gross Domestic Product, and Gross National Income, is released quarterly and are popularly used by economists for the following:

• Define the structure and size of the economy;

• Monitor the economic performance of the economy;

• Describe the sources of growth of the economy;

• Serve as bases for assessing government’s sectoral policies, programs, etc.

The PSNA adheres to the System of National Accounts 2008 (2008 SNA) which is an international standard for national accounting. It is a statistical framework that generates a set of macroeconomic accounts for policymaking, analysis and research purposes. The first SNA dates back in 1953 and had major updates in 1968, 1993, and, most recently, in 2008.

The 2008 SNA provides the latest recommendations to national accounts standards and are intended for use by all countries. This is designed to accommodate the needs of countries at different stages of economic development.

The SNA also serves as a framework for identifying data gaps/weaknesses as well as inconsistencies of data which would serve as bases for statistical developmental activities towards addressing data deficiencies and inconsistencies for a more reliable official statistics.

The 2008 SNA is produced and released under the collaboration of the United Nations, the European Commission for Economic Co-operation and Development, the International Monetary Fund and the World Bank.

Presently, the Philippine Statistics Authority (PSA) through the Republic Act 10625 known as the Philippine Statistical Act of 2013, signed into law on 12 September 2013, mandates the PSA through the Macroeconomic Accounts Service for the development and maintenance of national accounts, regional accounts, satellite accounts, input-output tables and other related macroeconomic accounts.

The development and maintenance of national accounts at the subnational levels to include the regional accounts and the provincial accounts are also the responsibility of the PSA. The Regional Statistical Service Offices (RSSOs) of the PSA in each of the seventeen (17) regions of the country are responsible in their respective regions for all the statistical coordination and development activities related to the national accounts.

The PSNA consists of the compilation of the Core Accounts and the Satellite Accounts which are released quarterly and annually following the Advance Release Calendar (ARC) of the PSA. The ARC provides details of the releases of the products and services of the PSA e.g. frequency of releases (monthly, quarterly, annual) as well as the specific dates and time of releases.

Core Accounts

The Core Accounts consists of the generation of the Gross Domestic Product (GDP) compiled at the production side, expenditure side and income side. The GDP production and GDP expenditure and its components are compiled and released every quarter and presented by major industries and by major expenditure items including details of each industry and expenditure items.

The GDP by income is compiled annually with disaggregation by institutional sector namely: financial corporations, non-financial corporations, general government, households including the non-profit institutions serving household sector. Performance economic indicators are also compiled resulting from the income approach of GDP namely: national income, disposable income, capital formation (or accumulation), external transactions, institutional savings and other relevant macroeconomic indicators.

The Input-Output (I-O) Accounts are also compiled following the System of Designated Statistics as mandated through the Executive Order (EO) 352. The existing EO mandates to identify and to generate the most critical and essential statistics required for social and economic planning based on approved criteria. The I-O presents a picture of the economy on how much commodities are produced and how much are consumed by industries, household, government, etc., as final users. The Supply and Use Tables (SUT), which serves as intermediate process before the compilation of the I-O, are also compiled to present an integrated and balanced picture of the total supply and total uses of goods and services in the economy.

Regional accounts consisting of the Gross Regional Domestic Product (GRDP) and the Gross Regional Domestic Expenditures (GRDE) are also compiled annually. For Gross Provincial Domestic Product, provinces of Palawan and Guimaras served as pilot provinces. Revisions and rebasing to 2018 of subnational accounts are programmed for implementation jointly with the regional offices of PSA.

Satellite Accounts

The Satellite Accounts serves to highlight the importance of special industries or products in the economy without overburdening the core accounts or the central framework of the System of National Accounts. This framework allows to present the contribution of special industries to the economy. The satellite accounts which are regularly compiled by the PSA are:

• Tourism accounts;

• Health accounts;

• Environment and natural resources accounts;

• Agriculture accounts;

• Ocean accounts; and

• Disaster risk reduction expenditure accounts.

To further support the analysis of the workings of the economy, the PSA regularly generate economic indicators/indices/statistics on the performance of agriculture, industries and services, on investments, on disaster and climate change, on environment, and other related indicators.

The Revisions and Rebasing of the PSNA

The PSA, as the compiler of the PSNA, has long recognized the need to improve the national accounts by updating the base year to a more recent one and to adopt the other recommendations of the 2008 SNA. As early as 2013 after the creation of the PSA and for almost seven (7) years now, the PSA started its efforts in this direction for revision and rebasing of national accounts.

Users of national accounts had also expressed the concern that the country’s economy is rapidly changing as results of information and communication technologies, the rise of globalization, digitalization of the economy and the existence of new types of transactions in the economy which deemed it important to revise and rebase the PSNA.

Revising and rebasing of national accounts statistics are considered an international practice among statistical offices worldwide like the revisions of other official statistics. Several countries which started/planned the revisions of national accounts following the recommendations of the 2008 SNA are: Australia, Canada, United States, Europe, Korea, Japan, New Zealand, Switzerland, Iceland and Norway. Implementation by these countries of the 2008 SNA standards and the revisions are either done on a staggered basis or all done at once.

Among the selected ASEAN countries, it was noted that present base years are: 2010 for Indonesia, Malaysia and Vietnam and 2012 for Lao PDR. The Philippines’ present base year for the revised and rebased new series of national accounts is 2018 which puts the Philippines ahead of other ASEAN countries.

In the PSA, the strategies adopted, among others, were to conduct a series of consultations among users of national accounts including data producers which wrapped-up in 2019 during the High Level Forum on the Overall Revision and Rebasing of the PSNA conducted on 30 March 2019 and the Focus Group Discussion on 28 September 2019. Presentations to regional users were also conducted in several fora during the press conferences of the Gross Regional Domestic Product (GRDP) conducted in the regions and in regional training conducted in clusters in Luzon, Visayas and Mindanao. Other implementation strategies were through a series of technical trainings on the 2008 SNA for national accounts compilers. Invited experts on national accounts came for three training missions from the International Monetary Fund (IMF) as well as experts from the ASEAN through the EU Compass Project who conducted two training missions. An international consultant, Dr. Viet Vu, formerly the Head of the National Accounts of the United Nations Statistics Division, was also commissioned to assist the PSA for the SNA training and to address compilation issues.

The Central Bank of the Philippines in 1950 came up with the first national account series for years 1938 and 1948.  From 1950 to 2020 or within the period of 70 years, there are five (5) series of revisions and changes of base years.  This includes the following:

The Philippine Statistics Act of 2013 or RA 10625 under Rule 4, Article 5 provides the mandates and functions of the PSA which, among others, shall primarily be responsible for the compilation of national accounts.

It was in 2018, when the Philippine Statistics Authority Board (PSA Board) approved the PSA Resolution No.11, Series of 2018 entitled “Approving the General Policy on the Revision and Rebasing of the Philippine System of National Accounts”.  This stipulates that the revision and rebasing of the PSNA should be every ten (10) years after the next release of the revised and rebased PSNA in 2020. This Resolution further resolved to program the synchronized conduct and releases of the PSA’s relevant and major censuses and surveys including the synchronized rebasing of price indices.

The revision and updating of the Quarterly National Accounts is also embodie in the PSA Resolution No. 01 Series of 2017-053 entitled “Approving the Policy on Updating the National Accounts”.

Other approved PSA Resolutions that provide policies on revisions and updating which affect the national accounts statistics include the following:

• PSA Resolution No.01 Series of 2017-120 – Approving the General Policy on Revising the Data on Agricultural Production, Prices and Related Statistics;

• PSA Resolution No. 2 Series of 2018 – Approving and Rebasing of the Consumer Price Index (CPI) from 2006 to Base Year 2012 and Adoption of the Chained Method in the 2012 –based CPI;

• PSA Resolution No. 13, Series of 2018 – Rebasing of the Construction Materials Wholesale Price Index (CMWPI) from 2000 to Base Year 2012 and with Some Revisions in the Methodology;

• PSA Resolution No. 10, Series of 2019 – Approving and Adopting the 2019 Philippine Standard Commodity Classification;

• PSA Resolution No. 13 Series of 2019 – Rebasing of the General Retail Price Index (GRPI) and Construction Materials Retail Price Index (CMRPI) in the National Capital Region from 2000 to Base Year 2012 and with Some Revisions in the Methodology;

• PSA Resolution No. 14 Series of 2019 – Rebasing of the General Wholesale Price Index (GWPI) from 1998 to Base year 2012 and with Some Revisions on the Methodology.

• Shift to base year 2018 from the old base year 2000
• Use of the 2018 Supply and Use Table for benchmark levels and for balanced GDP for production, expenditure and income
• Expansion of coverage and highlighting of emerging industries and products g., Information Communication and Technology
• Making explicit the adoption of the recommendations of the 2008 SNA
• Adoption of the latest classification systems of industries, commodities, etc
• Use of new benchmark data and parameters
• Enhanced estimation methodologies

The choice of a more updated base year improves the measure of the economic growth and becomes more accurate if the base year is not too far back. The choice of a base year as shown in many literatures is that, the base year should represent a “normal year” for the economy – with no influences due to economic and financial crisis, disaster, typhoons, calamities and/or other related events that brings negative impact to the economy.

The PSA’s choice of 2018 as the new base year followed after assessing the series of the historical events, both international and domestic, which somehow affected the economy. It was noted that a choice of a normal year to be considered as the new base year posed some problems since the results of the evaluation did not have a conclusive basis on a normal year for a choice of the base year. This considers another criterion on the availability of data from censuses and surveys including administrative data to serve as bases for the compilation of the Supply and Use Table for the 2018 benchmark levels. Availability of data for base year became an important consideration which includes the following:

• 2018 Census of Philippine Business and Industry (CPBI);

• 2018 Family Income and Expenditure Survey (FIES);

• 2018 Input-Output Survey of Philippine Business and Industry (IOSPBI);

• 2018 Labor Force Survey (LFS);

• 2018 Financial Statements of National Government and Local Government Units including Government-Owned and Controlled Corporations (GOCCs);

• 2018 Private Financial Statements;

• 2018 Re-referenced prices/price indices e.g. consumer prices, producers prices, retail prices, wholesale prices, construction materials prices, farm prices, international prices, world prices, etc.;

• 2018 Exports and Imports Data (updated and re-run series).

Components making up the GDP production and expenditure measures are estimated using independent approaches. We use various data from surveys and administrative based information with different measurements and timing differences which results in differences known as the statistical discrepancy.  The components within the supply and use framework are reconciled to provide an integrated and balanced picture of the total supply and total uses of goods and services in the economy. This process makes the estimates of SUT balanced between the production and expenditure.

In practice, the 2018 SUT was utilized to examine further the resulting revised/rebased estimates of the production and expenditure side of the accounts and balance these two sides of GDP taking into account the income side of the GDP. The SUT was compiled at the level of 80 detailed industries and 80 detailed commodities which allow presenting them in a summary level of 16 x 16 major industries and major commodities.  This activity was done to produce a zero statistical discrepancy (SD) for the 2018 benchmark year while ensuring the conceptual soundness of the national accounts.

For non-benchmark years, the target is to maintain zero SD’s for the annual estimates and to keep the SD to GDP ratio to a minimum of one percent or less, both at current and at constant prices for the quarterly estimates. 

Following the 2009 Philippine Standard Industrial Classification (2009 PSIC), an important feature of the revised and rebased national accounts is to allow, in a more systematic way, the expansion of the coverage of industries as well as to provide a more analytical presentation of the accounts. The new configuration now presents eighty (80) sub-industries grouped into sixteen (16) major industries as compared to the old configuration of seventy-two (72) sub-industries which is grouped into twelve (12) major industries. This include the following new configuration of industries:

• Agriculture, forestry and fishing;

• Mining and quarrying;

• Manufacturing;

• Electricity, steam, water, and waste management;

• Construction;

• Wholesale and retail trade; repair of motor vehicles and motorcycles;

• Transportation and storage;

• Accommodation and food service activities;

• Information and communication;

• Financial and insurance activities;

• Real estate activities;

• Professional, and business services;

• Public administration and defense; compulsory social activities;

• Education;

• Human health and social work activities;

• Other services.

Under the expenditure side of the GDP, “Valuables” is an additional expenditure item which is now captured and highlighted as additions to the gross capital formation. The new classification of the expenditure side are as follows:

• Household final consumption expenditure;

• Government final consumption expenditure;

• Gross capital formation:

• Gross fixed capital formation:

Construction,
Durable equipment,
Breeding stocks and orchard development,
Intellectual property products;

Changes in inventories;

Valuables;

• Exports:

  
  Exports of goods,
  Exports of services;

• Imports:

  
  Imports of goods,
  Imports of services.

Some of the major expenditure items e.g., Durable equipment and Exports and Imports of goods and services highlighted new commodities aligned with the latest 2015 Philippine Standard Commodity Classification (PSCC) and BPM6 Manual.

The recommendations in the 2008 SNA, mostly affecting the Gross Domestic Product and Gross National Income were prioritized for inclusion in the new revised and rebased national accounts. The considerations are on the feasibility to adopt, availability of data and its impact to ensure consistencies and coherent of the concepts with other international standards.

Among others, the following improvements were undertaken:

1. Expansion of the scope and coverage of industries and expenditure items;
2. Use of more updated data including new data sources;
3. Better estimation methodologies; and
4. Harmonization with other existing international standards e.g., BPM6 Manual

The following are some examples showing the changes incorporated for the revised and rebased data series of national accounts:

    Changes affecting the production side of GDP 

       Changes affecting the expenditure side of GDP

An important 2008 SNA recommendations, among others, is the adoption of the latest classification systems to align with the latest international standards. For the revision and rebasing of the PSNA, the following classification standards were adopted:

• 2009 Philippine Standard Industrial Classification (PSIC) – is a classification of industries prevailing in the country according to their specific economic activities;
• 2015 Philippine Standard Commodity Classification (PSCC) – is a detailed classification of all commodities that are produced in the domestic economy including those commodities that enter the Philippine Trade;
• 2009 Philippine Classification of Individual Consumption According to Purpose (PCOICOP) – is a detailed classification of individual consumption expenditures on goods and services;
• 2018 Philippine Standard Geographic Classification (PSGC) – is a systematic classification and coding of the geographic areas in the country;
• 2012 Philippine Standard Occupational Classification (PSOC) – is a classification of different occupations of the working populations including the military workforce of the country.
   

Benchmark data and annual data for the revised and rebased PSNA are provided from censuses and surveys of establishments and households, administrative data like financial statements as well as alternative data sources from field visits and special studies.

Specifically, these data that supports the estimation of the revised and rebased PSNA are as follows:

• Census of Philippine Business and Industry, 2012 and Preliminary 2018

• Census of Agriculture and Fisheries, 2012

• Annual Surveys of Philippine Business and Industry, 2013, 2014, 2015, 2016

• Input Output Surveys of Philippine Business and Industry, 2012 and Preliminary 2018

• Family Income and Expenditure Surveys, 2012, 2015 and Preliminary 2018

• Cost and Return of Production of Agricultural Crops

• Foreign Trade Statistics

• Results of Field Visits

• Annual Financial Reports from COA

• Balance of Payments

In addition, other data sources from private agencies and private associations serve to supplement the benchmark data.  These are mostly coming from:

• Maynilad Water Services, Inc (MWSI);

• Manila Water Company, Inc (MWCI);

• Manila Electric Company (MERALCO);

• Cement Manufacturer’s Association of the Philippines (CeMAP);

• Chamber of Mines;

• Chamber of Automotive Manufacturers of the Philippines (CAMPI);

• Business Processing Association of the Philippines (BPAP);

• Contact Center Association of the Philippines (CCAP);

• World Bank (international commodity prices) including Dubai prices

• Construction Association of the Philippines

• Philippine Stock Exchanges (on Financial Statement of listed companies);

• Consolidated Financial Statements of the Conference of Inter-island Ship owners and Operators (CISO);

• Financial indicators (including trends) ono revenue, income and expenses of private banks and private non-banks (e.g. pawnshops, money changers)
   

Methodologies of the Revised and Rebased PSNA

Gross Domestic Product is the sum of gross value added of all resident producer units.

Gross value added (GVA) is defined as the value of output less the value of intermediate consumption. Output is defined the goods and services produced by an establishment. It is equal to the value of sales adjust for the changes in inventories of finished goods, that is goods produced and ready  for sale but not yet sold, or goods sold adjusted for sales of goods produced in an earlier period. Meanwhile, Intermediate Consumption consists of the value of the goods and services consumed as inputs by a process of production, excluding fixed assets whose consumption is recorded as consumption of fixed capital.

GDP is based on the concept of Gross Value Added (GVA).  The production measure of GDP is derived as the as the value of output less intermediate consumption plus any taxes less subsidies on products not already in value of output.

Operationally, GDP at the production of the PSNA is compiled for the industries which allows the study of industrial activity in the economy and permits the compilation of supply and use tables and input-output tables.  Sectoring of the industries is based 2009 Philippine Standard Industrial Classification System (PSIC).  The aggregates, referring to Output and Intermediate Consumption, are neither asked in surveys or censuses.  For instance, businesses do not directly measure their intermediate usage of goods and services; rather they record their purchases and the changes in inventories of fuels and materials. These are derived data from the specific items processed from the results of establishment surveys, household surveys and administrative data, as shown in Table 1.

Table 1. Production Items

GDP is the sum of the gross value added for each of the sixteen (16) industries in the PSNA, as described in statistical notations below:

Where:       

GDP = gross domestic product
GVA = gross value added
j  = industry classification (i.e. AFF, MAQ MFG,…OS)

A. Production Approach of measuring GVA at industry level

Measuring GVA at the industry level takes into account both the goods and services produced by the organized industry and unorganized industry for a more comprehensive picture of the performance of the industries or the economy as a whole. The organized industry includes the establishments and the government as producers of market output, output for own use, and non -market outputs, while the unorganized industry includes those that are not part of the organized industry but also producers of output such as the households.

A.1. Organized Industry

Measuring GVA is done at the most detailed possible. It is computed at the 5-digit level of PSIC for each of the sub-industries in an industry and then summed up to derive the total GVA of the industry.

Where:

        GVA     = gross value added
        GO       = gross output
        IC         = intermediate consumption
        i           = sub-industry classification
        m         = number of 5-digit level PSIC in the j^th industry

A.2. Unorganized industry

Goods and services produced not captured in formal establishment surveys like the ASPBI and CPBI as well as administrative data are also included in the estimation of GDP by indirectly estimation using the residual employment approach.

Using this approach, employment in the unorganized industry is derived as the residual of the employment of Labor Force Survey (LFS) and the CPBI for the benchmark year or the ASPBI for the non-benchmark years. The residual employment is multiplied to the per capita gross output of small establishments or those establishments with less than 20 employees in the ASPBI and CPBI to derive the gross output of the unorganized industry. Gross value added is derived by multiplying the resulting gross output to the gross value added ratio of small establishments.

The residual employment approach in measuring GVA of unorganized industry is shown below:

Where:

GVA_unorg  = gross value added of unorganized industry
GO_unorg  = gross output of unorganized industry
GVAr_small   = gross value added ratio for small establishments
EMP_unorg  = estimated unorganized employment
Emp_lfs  = total employment from the Labor Force Survey
Emp_org  = total organized employment from the  establishment survey

Unlike in estimating the GVA of organized industry, estimating GVA of the unorganized industry is done at the more aggregate level, which the industry level, because of the limitations  in terms of representativeness of  the data.

B. Computing gross value added ratio

Gross value added ratio is a derived parameter indicating the amount of gross value added per unit of gross output. At the industry level, gross value added ratio is computed as:

Where:

GVAr    = gross value added ratio
GVA     = gross value added
GO       = gross output of an industry
i           = sub-industry classification

C. Derivation of GDP at Constant Prices

Constant price estimates of GDP are obtained by expressing values in terms of a base period. In theory, the price and quantity components of a value are identified and the price in the base period is substituted for that in the current period.

The 2018-based constant price estimation used the single extrapolation method. This is an improvement in the estimation methodology as compared to the single deflation method used in the 2000-based series. The operational methodology of the single extrapolation method is described below.

Single Extrapolation

This method means that the “output is deflated using an output price index.”¹ The value added is extrapolated by using volume indicators, and the assumption is that there is a constant relationship in the output, intermediate consumption and value added in volume terms.

Operationally, the single extrapolation approach includes the following steps:

1. The Gross Output at constant prices was derived by deflating the GO at current prices with an appropriate or closest price deflator as possible.

where

G0 cu_t= estimated GO at time t at current prices
G0 k _t= estimated GO at time t at constant prices
G0 def_t= price deflator for the gross output at time t

2.  The Gross Value Added (GVA) at constant prices is then computed by:

where:

G0 k _t= estimated GO at time t at constant prices
GVA k _t= estimated gross value added at time t at constant prices
GVA r₂₀₁₈= gross value added ratio in the base year 2018

References:

International Monetary Fund (2017): Quarterly National Accounts Manual, 2017 Edition, IMF, Washington DC. 
Available from: https://www.imf.org/external/pubs/ft/qna/

United Nations (2008):  System of National Accounts, 2008, United Nations Publications Sales No. E.08.XVII.29 
Available from: https://unstats.un.org/unsd/nationalaccount/sna2008.asp

List of acronyms

Annex 1: INDUSTRIES and SUB-INDUSTRIES 
As of April 2020

EXPENDITURE TYPE and EXPENDITURE GROUP or EQUIPMENT/ITEM 
As of April 2020

Source: Philippine Statistics Authority