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Sec 2010 - FAQ

European System of accounts - Esa 2010: Questions and answers

1. What is the European system of accounts (Esa)?
2. Why are national accounts important?
3. How is the system of national accounts built?
4. Is Esa regulated by a specific law?
5. Why a change in Esa?
6. When are national accounts changing?
7. What are the main changes in Esa 2010?
8. Are Esa 2010 changes the same for all European countries?
9. Are there additional sources of revisions other than those relating to Esa 2010?
10. Has the updated Esa had an impact on the estimate on macroeconomic variables?

1. What is the European system of accounts (Esa)?

The European system of national and regional accounts is the framework for the measurement of the economic and financial activities of an economic system, its components and the relations between them in a given period of time (typically one year or one quarter).

Transactions performed by economic agents (defined institutional units) in their relations with other resident or non-resident units in the economic territory are the object of the measurement.

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2. Why are national accounts important?

National accounts are the main tool for measuring the overall economic situation of a country. They are used by public bodies, economic and social operators, which find in them important information instrumental for their decisions; moreover, they are a key reference for the media, enterprises and academic researchers as well.

Some of the policy indicators used for the governance of the European Union and of single Member States are estimated in national accounts. For instance, ratios of public deficit and debt in percentage of Gdp (the so-called Maastricht parameters) are used to monitor the public finance situation in each country. European authorities use Gross national income (Gni) to determine contributions to the Eu budget by each country.

The per capita regional Gdp is used to distribute structural funds to Eu regions. Moreover, quarterly growth rates of gross domestic product are one of the reference indicators in the monetary policy of the Eurozone.

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3. How is the system of national accounts built?

It is possible to build up periodical accounts of uses and resources for any subject economically organized, such as large enterprises, small households or a whole country.
These accounts record, in an aggregated and systematic form, the set of transactions performed by economic subjects in the processes of production, generation, allocation and use of resources.

The main aggregates estimated by national accounts are presented in the resources and uses economic account that includes, among resources, Gdp and imports of goods and services, and among uses final consumption expenditure, gross fixed capital formation and exports of goods and services. The national account system shows the balance between the supply of goods and services and the corresponding final demand.

The sequence of accounts by institutional sector provides a systematic and integrated description of the operators’ behaviour (households, government, financial and non-financial corporations, non-profit institutions serving households and the rest of the world) at different stages of the economic process: production, generation of income, distribution of income, redistribution of income, use of income and financial and non-financial accumulation.

In order to compile estimates for the national account aggregates the whole set of data resulting from Istat surveys are used; they are also integrated with information from administrative archives and from external surveys, both public and private.

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4. Is Esa regulated by a specific law?

The European system of national and regional accounts is adopted through the Regulation (Eu) No 549/2013 of the European Parliament and of the Council (published in the Official Journal of 26 June 2013), which also sets obligations about timing and ways of data transmission to Eurostat (the so-called transmission programme).

Considering the relevance of the quality of data provided to users, the rules defining the methodology are compulsory and ensure estimates comparability among Eu countries.

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5. Why a change in Esa?

Over the last twenty years, substantial changes have impacted economies: in particular the increasing role of Ict in the production processes, the growing importance of intangible assets, intellectual property products and services, and the globalization of markets.

Therefore the macroeconomic statistics needed an adaptation all over the world to the new context, resulting from the update of the United Nations system of accounts (Sna), which sets guidelines on national accounts worldwide. Thus all the countries are moving from Sna1993 to the current system: Sna2008.

The same happened for the European system of accounts. The new Esa2010 is consistent with the Sna2008 guidelines, even with several adaptations regarding the presentation of data, the higher degree of precision in defining some concepts (particularly those used for specific Eu purposes).

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6. When are national accounts changing?

Since September 2014, the new European system of national and regional accounts (Esa2010) are fully operating, and all data will then be compiled and disseminated in accordance with Esa2010.
Since the implementation of this Regulation requires major adaptations in the national statistical systems, derogations have been granted by the Commission to Member States, regarding temporary delay in data transmission for specific variables and details.
In particular, Italy will conform with a two-year delay to the new calendar which sets the transmission of quarterly data on employment and compensation of employees at 60 days from the reference quarter (currently it is at 70 days).

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7. What are the main changes in Esa2010?

The main changes in Esa2010 affect both methodology for the estimation of economic indicators in national accounts and timeliness in data dissemination.The main differences are:
• research and development – R&D – and weapon systems expenditure is recorded differently: it is no longer considered as current expenditure but as expenditure for investments (gross fixed capital formation);
• a change occurs in recording goods sent abroad or received from abroad for processing without change in ownership (processing activity). The new definitions change significantly the estimate of flows of goods and services in international trade;
• starting from 2017, Member States shall transmit a supplementary table to record pension entitlements of all pension schemes, including those of government whether unfunded or funded;
• the calculation of the non-life insurance output has been amended as claims concerning an exceptional event (catastrophe) are to be treated as a capital transfer and not as a current transfer;
• the list of bodies belonging to the Public Administration is revised to take into account methodological adjustments introduced by Esa2010;
• the timeliness of data transmission to Eurostat and of national dissemination is improved.

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8. Are Esa2010 changes the same for all European countries?

The regulation applies to all Eu legal acts that refer to the Esa or its definitions. All Member States are obliged to adopt Esa2010 starting from September 2014 for data used to estimate European indicators, in order to ensure comparability. Member States may decide to adopt Esa2010 for their own purposes even prior to September 2014. Also in this case they have continued to transmit to Eurostat data in accordance with Esa95, so as to ensure European comparability.

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9. Are there additional sources of revisions other than those relating to Esa2010?

Yes, there are many other sources. By moving to Esa2010 Italy, as well as many other Eu countries, has taken the opportunity to introduce many changes due to the update and improvement of information sources and estimates methodologies.

In the first place, given the availability of richer information sources, Istat has changed the estimation procedures of two of the most important components of the National Accounts: labour input measures (quantity of labour employed in the economy in a certain period) and non-observed activities (specifically the part related to the under-declaration of economic activity by firms).

Among other changes, the estimation of illegal activities is included for the first time in the National Accounts (and consequently in the Gdp estimation) in order to comply with the approach adopted in all Eu countries. The illegal activities considered are: narcotics, prostitution and smuggling (alcohol and tobacco). The estimates methodologies for these activities are consistent with Eurostat guidelines.

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10. Has the updated Esa had an impact on the estimate on macroeconomic variables?

Yes, there have actually been relevant effects on the estimate of macroeconomic variables. On the whole Gdp has been revised for a value of 59 billion (+3.7% over previous absolute value). Changes due to methodological innovations introduced by Esa2010 contributed 1.6 percentage points (24.6 billion euros) to the revaluation of the nominal Gdp in 2011; the main share (1.3 percentage points) is due to the capitalization of research and development expenditure.

The 0.8 percentage points upward revision is due to changes related to the overcoming of European reservations on the implementation of Esa95. Among these changes it should be recalled the inclusion of some illegal activities, which contributed to the revision of Gdp by 1.0 percentage points - that is 15.5 billion euros - (including related activities from the production of related legal goods and services), of which 10.5 billion deriving from the marketing of illegal drugs, estimated in 10.5 billion euros, from prostitution (3.5 billion euros), and from tobacco smuggling (0.3 billion euros).

The remaining share of the revaluation, accounting for 1.3 percentage points, comes from the combination of several effects related to innovations in national sources and methodologies. Considering this, the new estimate of the underground economy, which in 2011 accounts for 11.5% of Gdp, is to be included. When the illegal activities component is added to this, thus corresponding to the wider definition of non-observed economy, it results equal to 12.4% of Gdp.

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tags:
consumptions, deficit, exports, GDP, general government, household, imports, income, institutions, investments, national accounts, production, regional accounts, value added
theme:
National accounts
document typology:
News
Date of publication
14 March 2014
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