Framework and classificationExpenditure data compilationExpenditure data validation |
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Framework and classification
National accounts expenditures are essential for the International Comparison Program (ICP). First, they are used as weights to aggregate purchasing power parities (PPPs) through the various levels of aggregation up to gross domestic product (GDP). Second, they are ultimately deflated by the PPPs and expressed as real expenditures. Neither aggregated PPPs nor real expenditures will be reliable unless the national expenditures provided by economies are comparable—that is, they are compiled using the same definitions of GDP and its component expenditures and are equally exhaustive in their measurement of economic activity. The common national accounts framework was System of National Accounts (SNA) 93 for the ICP 2011 cycle and SNA2008 for the 2017 ICP cycle.
The SNA defines GDP from the expenditure side as the sum of expenditures on final consumption, gross capital formation, and net exports. Final consumption is the total expenditure on the goods and services consumed by individual households or the community to satisfy their individual or collective needs. Gross capital formation is the total expenditure on gross fixed capital formation, changes in inventories, and acquisitions less disposals of valuables. Net exports are the difference between the value of goods and services exported and the value of goods and services imported
The 2017 ICP expenditure classification on GDP comprises six main aggregates, which are broken down into 28 expenditure categories, 63 expenditure groups, 126 expenditure classes, and 155 basic headings.
Expenditure data compilation
Economies participating in the ICP are expected to estimate their GDP for the reference year in line with the SNA and to disaggregate this GDP estimate into the relevant expenditure components identified in the ICP expenditure classification.
At the lowest level of the classification, the expenditure components are termed basic headings. The classification breaks down the expenditure on final goods and services into 155 basic headings that comply with the functional and product classifications of SNA2008 and are the building blocks of the ICP comparison. They are the level at which expenditures are defined and estimated, items are selected for pricing, and prices are collected. Basic headings are the level at which PPPs are first calculated.
In principle, a basic heading consists of a group of similar well-defined goods or services. In practice, a basic heading is defined by the lowest level of final expenditure for which the participating economies can estimate explicit expenditures. Consequently, basic headings can cover a broader range of goods or services than is theoretically desirable.
Expenditure data validation
National accounts data validation requires three stages: first, intra-country validation carried out by the individual participating economies; second, inter-country validation carried out at the regional level; and third, inter-regional validation carried out at the global level.
Before the national accounts expenditure data are sent to the regional offices, basic edits are carried out by the national implementing agencies. These include:
- Ensuring SNA compliance, including data completeness, applicability of positive and negative values, and additivity
- Ensuring the correct estimation of financial intermediation services indirectly measured (FISIM), net purchases abroad, and nonprofit institutions serving households (NPISHs).
Furthermore, an economic plausibility assessment, such as verifying per capita basic-heading expenditures and basic-heading shares of GDP, is also advised.
The validation edits carried out at the national level are repeated at the regional level. The aim of the regional validation is to compare the consistency of data from similar economies within a region. The regional implementing agency identifies clusters of economies based on their economic similarities. GDP per capita in previous years serves as a key indicator of the cluster to which an economy is allocated.
The global comparison of real expenditures (and their per capita equivalents) is achieved by linking regional results to form a global set of results. At the global level, the same intra-country validation processes as previously defined are followed. The intercountry validation process is also followed across economies and within and between regions.
Further resources:
- Current ICP Classification ( | )
- ICP 2005/2011 Classification ( / / / |)
- National Accounts Validation Tool ( | )
- Operational Guidelines and Procedures for Measuring the Real Size of the World Economy