Bhutan
Technical Assistance Report-SARTTAC Report on National Accounts Statistics Mission
Author: International Monetary Fund. Statistics Dept.
Publication Date:
23 Mar 2018
eISBN:
9781484347256
Language:
English
Keywords:
ISCR; CR; statistics; GDP; GDP estimate; QHCES result
Download PDF (1.1 MB)

This Technical Assistance Report discusses the findings and recommendations made the IMF mission to assist the Bhutanese authorities in improving estimates of annual GDP, and in developing methods for compiling quarterly GDP estimates. The mission found that the National Statistics Bureau (NSB) is engaged in a range of projects to improve Bhutan’s national accounts statistics. Updated annual GDP statistics signal an improvement in data quality, which should enhance policymakers’ ability to formulate and operationalize evidence-based decisions. Significant improvements to Bhutan’s national accounts statistics can be achieved using a three-step process. The NSB should also keep in mind the need to incorporate methodological and conceptual/definitional revisions during the benchmarking and rebasing process.

Abstract

This Technical Assistance Report discusses the findings and recommendations made the IMF mission to assist the Bhutanese authorities in improving estimates of annual GDP, and in developing methods for compiling quarterly GDP estimates. The mission found that the National Statistics Bureau (NSB) is engaged in a range of projects to improve Bhutan’s national accounts statistics. Updated annual GDP statistics signal an improvement in data quality, which should enhance policymakers’ ability to formulate and operationalize evidence-based decisions. Significant improvements to Bhutan’s national accounts statistics can be achieved using a three-step process. The NSB should also keep in mind the need to incorporate methodological and conceptual/definitional revisions during the benchmarking and rebasing process.

SUMMARY OF MISSION OUTCOMES AND PRIORITY RECOMMENDATIONS

In response to a request from the National Statistics Bureau (NSB), a South Asia Regional Training and Technical Assistance Center (SARTTAC) national accounts statistics technical assistance (TA) mission visited Thimphu, Bhutan during June 19–23, 2017. This mission was SARTTAC’s inaugural national accounts statistics TA mission to Bhutan; it followed a mission that was conducted by the IMF’s Statistics Department (STA) during May of 2016.

The main purpose of the mission was to assist the authorities in improving estimates of annual GDP, and in developing methods for compiling quarterly GDP estimates.

The mission found that NSB is engaged in a range of projects to improve Bhutan’s national accounts statistics. For example, results from a 2017 Bhutan Living Standards Survey were being tabulated; a new Quarterly Household Consumption Expenditure Survey (QHCES) was underway; plans were evolving to conduct the first economic census (EC) during the fall of 2017; and a price statistics improvement program is expected to begin in July 2017 and to produce results within one year. Source data from these data collection and improvement efforts will facilitate rebasing of the annual GDP estimates from 2000 to 2015 and developing quarterly GDP by expenditure.

Updated annual GDP statistics signal an improvement in data quality, which should enhance policymakers’ ability to formulate and operationalize evidence-based decisions. These decision-making processes are central to better management of the economy and, potentially, to faster, more balanced growth. The compilation of quarterly GDP statistics for the first time will also benefit economic policymakers—providing more timely information—and bring Bhutan more in alignment with international standards.

Significant improvements to Bhutan’s national accounts statistics can be achieved using the following three-step process. First, there is finalization, adoption, and implementation of Results Based Management (RBM) workplans that were developed during the mission for the compilation and dissemination of annual GDP and quarterly GDP statistics. Second, the authorities should perform early tests of EC and QHCES results to ensure their accuracy and reliability. Third, the authorities should accelerate their planned acquisition of new employees to perform the increased workload that is envisioned.

The NSB should also keep in mind the need to incorporate methodological and conceptual/definitional revisions during the benchmarking and rebasing process. For example, gross value added (GVA) in volume terms is derived using direct deflation methods and double deflation is not used. Sufficient source data are available currently to produce double-deflated GVA estimates for five economic activities. However, given anticipated new source data and price statistics, the NSB should be able to expand double-deflation to selected components of 10 economic activities during the upcoming benchmark. (Figure 1).

Figure 1.
Figure 1.

Double Deflation of Bhutan’s Annual GDP Statistics

Citation: IMF Staff Country Reports 2018, 079; 10.5089/9781484347256.002.A001

Sources: NSB and SARTTAC Mission.
Table 1.

Priority Recommendations

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Further details on the priority recommendations and the related actions/milestones can be found under Detailed Technical Assistance to Bhutan.

IMPROVING ANNUAL GDP AND DEVELOPING QUARTERLY GDP STATISTICS

A. Ongoing and Upcoming Surveys

1. Bhutan initiated a QHCES in early 2017, and plans to conduct an EC for the first time during the fall of 2017. It is critical that the results of these data collection efforts be accurate and reliable. Therefore, the mission recommended that the NSB conduct early tests of the accuracy and reliability of the data being collected by the QHCES and of the EC. In the case of the QHCES, the mission recommended that the results of a subsample of respondents be validated by revisiting the respondents to confirm the already provided information. In the case of the EC, the mission recommended that the NSB pretest the form to ensure that it elicits the desired information accurately and reliably.

2. While the EC may solve a source data problem for the new 2015 benchmark, selected annual surveys may be required to provide annual indicators going forward. The latter requirements may be mitigated to the extent that an anticipated new ad valorem tax regime is designed to capture sufficient information to compute GVA in a double-deflation format.

3. Bhutan plans to collaborate with Department of Revenue and Customs, the Asia Development Bank (ADB), and with other agencies of the Government of Bhutan to develop a Business Register as part of the EC effort. Typically, a Business Register is a starting point for, not a product of, an EC data collection effort. Accordingly, the mission advised the authorities to give careful consideration to the development of the Business Register to ensure that the EC reflects appropriate coverage.

Recommendations:

  • The NSB should perform accuracy and reliability tests of the QHCES and EC as soon as possible so that adjustments can be incorporated into the data collection process to produce accurate and reliable results.

  • The NSB should decide as soon as possible on the need for selected annual surveys to supplement EC data collection; design the related forms; and educate potential respondents concerning these new data collection requirements.

  • The NSB should plan to evolve the Business Register and EC data collection in a manner that ensures comprehensive EC coverage. At the same time, a plan should be developed for updating the Business Register continuously—preferably by the Department of Revenue and Customs.

B. Status of Recommendations of Previous TA Missions

4. The NSB has made steady progress on implementing the recommendations of previous national accounts TA missions—the most recent of which was in May of 2016. (Appendix IV) Important “Complete” recommendations included: obtaining funds to conduct the 2017 Bhutan Living Standards Survey; developing plans to rebase Bhutan’s producer price index (PPI) and to develop export and import price indices (XMPI) using United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) resources; developing quarterly volume indicators for compiling quarterly GDP; and developing a commodity-flow approach for measuring annual GVA for construction.

5. The NSB is “In progress” on two important recommendations. First, the NSB is developing a plan to assist the Ministry of Agriculture and Forestry in preparing forecasts of crop output with assistance from the US Foreign Agriculture Service. Second, the NSB is developing a volume extrapolator for selected general government services because expenditure data are lumpy.

6. Important “Incomplete” recommendations included: undertaking seasonal adjustment training; and developing high-quality business process documentation.

Recommendation:

  • The authorities should use the list of recommendations with status to track progress on important tasks.

C. TA Provided

7. The mission provided TA to improve annual and quarterly GDP estimates mainly for financial services indirectly measured (FISIM) and for insurance. For FISIM, currently Bhutan follows the 1993 System of National Accounts (1993 SNA) standard for measuring output: property income earned less interest paid. The new 2008 SNA calls for measuring FISIM output using a reference rate approach. The mission recommended that the authorities use the “Base rate” (up to 2016) and the “Minimum Lending Rate” (beginning in 2016) established by the Royal Monetary Authority (RMA) as the reference rate for computing FISIM. In addition, the mission developed standardized EXCEL worksheets in a time series format for computing FISIM on deposits and Loans (SNA interest) that can be adapted for annual or quarterly compilations. (The EXCEL worksheets are available from the mission upon request.)

8. The authorities were using 2008 SNA-like methods for compiling annual estimates of Insurance output based on data from company financial reports. The process was complicated; however, because the two major insurance companies in Bhutan produce both insurance and financial services. One of the two insurance companies has issued annual reports since 2014 that reflect the combined results of insurance and financial services operations—with no easy method for disaggregating the report. The mission recommended that the authorities contact the company to request a disaggregation of the report so that receipts and expenditures for insurance versus financial services can be identified separately. As a prototype for how the data should appear and the related compilation of insurance services output, intermediate consumption, and GVA, the mission used the financial report of the second major Bhutan insurance company (Appendix V).

9. The mission also provided TA to the authorities in the form of comments on the QHCES and EC report forms. Appendix VI reflects the comments made on the EC data collection form. Comments on the QHCES were marginal and were intended to make the data collection effort more comprehensive.

Recommendations:

  • The authorities should obtain time series data from the RMA on deposits, loans, and their respective interest rates for financial institutions, and use this information to compile statistics on FISIM.

  • The authorities should contact the relevant insurance company to obtain disaggregated data on insurance versus financial services accounts as soon as possible.

  • The authorities should incorporate the mission’s suggestions for improvements to the EC and QHCES data collection forms.

D. RBM Workplans

10. Planning is an important factor that will determine the success of efforts to rebenchmark and rebase Bhutan’s annual GDP and compile quarterly GDP for the first time. Accordingly, the mission assisted authorities in developing a workplan for completing this work. The workplan has three components: (1) an RBM workplan with overarching outcomes, indicators, baselines, and milestones (Appendix I); (2) a detailed schedule of events/activities that leads to the rebenchmarking and rebasing of annual GDP statistics (Appendix II); and (3) a detailed schedule of events/activities that leads to the compilation and dissemination of quarterly GDP statistics (Appendix III).

Recommendation:

  • The authorities should finalize the milestone dates in the RBM workplan; revise the annual and quarterly GDP events/activities dates to align them with data availability as determined by data supplying partners; adopt the workplans; and begin to implement them.

Appendix I. Overarching RBM Workplan

Objective

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Work Plan

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Appendix II. Phased Annual GDP Rebasing Program

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Appendix III. Phased Development of Quarterly GDP Expenditure Estimates

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Appendix IV. Status of Recommendations from Previous TA Missions

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Appendix V. Comments on Draft EC Data Collection Form

Bhutan’s National Statistics Bureau (NSB) is drafting an Economic Census form, and requested that the International Monetary Fund’s (IMF’s) South Asia Regional Training and Technical Assistance Center (SARTTAC) provide early comments on the form. SARTTAC’s Real Sector Statistics Advisor provided comments on the following five sections of the form that have been developed: General Information, Employment, Revenue and Expenses, Assets, and Inventories.

General Information

  • Request respondent’s email address.

  • Request that respondent indicate the types of primary goods/services that are being produced to assist with the industry classification process.

Employment

  • Request information on the number of “part-time” workers.

  • Separately identify “bonuses” as a type of compensation.

  • Request information on the type and amounts associated with compensation in kind: e.g., uniforms used explicitly for work; meals provided during working shifts; equipment including vehicles that are provided to employees by employers to perform work; etc. (This applies for accrual accounting purposes. National accounts statistics should be measured on an accrual basis.)

Revenue and Expenses

  • Create a “Property income” category, which would include “interest,” “dividends,” “rent/royalty,” etc.

  • Among costs/expenses, include “Depreciation,” “Contracted costs, including consultancies,” and “Board of Directors costs.”

Assets

  • Among fixed assets, include a category for “Intellectual property assets, to include “R&D,” “Computer software,” “Databases,” etc.

  • Create a category for “Valuables.”

  • For the “Capital Expenditures” category, be certain to indicate that this category should include “Additions and alterations and Major replacements” to existing structures.

  • Consider collecting data on the eight categories each of Financial Assets and Liabilities for later development of the “sequence of accounts.”

Inventories

Include a category for “Normal inventory losses” due to wastage, pilferage, etc.

Appendix VI. Compiling GVA for Insurance

The following is a methodology for compiling gross value added for Bhutan’s BIL (Bhutan Insurance Limited) using the related annual company financial report for 2015.

Gross output of Insurance (non-life)

Premiums Earned (152.9 mil Nu) [page 6 and footnote 18 on page 48]

Premium supplements (54.4 mil Nu) [footnote 13b on page 46] {profits for the year in the General Reserve Fund}

Actual Claims (100.4 mil Nu) [page 6 and footnote 22a, b, and c and footnote 23 on page 50] {Claims paid, plus outstanding claims, minus outstanding claims from the beginning of the year, less claims recovered from reinsurance.}

Change in Equalization Provision (33.6 mil Nu) {footnote 17a on page 48) {provisions for unexpired risks (added)).

Gross output is derived as (152.9+54.4)-(100.4+33.6) = 73.3 mil Nu.

Intermediate consumption (IC) is derived from footnote 25 (page 51): Operating Expense (46.5 mil Nu). In addition, the value for Commission Expense (9.4 mil Nu) is included (footnote 24 on page 50). However, Operating Expense is reduced by the amount of Employees Remuneration and welfare benefits (29.0 mil Nu) and Depreciation and Amortization (4.1 mil Nu), which are part of GVA.

Intermediate consumption is computed as: 46.5 + 9.4 – 29.0 – 4.1 = 22.8 mil Nu.

Gross Value Added is calculated as: (GO – IC) 73.3 – 22.8 = 50.5 mil Nu.

Note: It is also necessary to compile the GO (mainly investment returns) and IC (investment-related and adjusted expenses) for BIL’s financing operation.

This compilation of GVA for BIL is facilitated by the fact that receipts and expenditures for BIL’s non-life insurance and financing operations are identified separately in the company’s annual report. Similar compilations for other Bhutan insurance companies is made difficult because separate delineation of insurance and financing operations is not presented in the related annual reports for recent years.

Appendix VII. Officials Met during the Mission

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Cover IMF Staff Country Reports
Bhutan: Technical Assistance Report-SARTTAC Report on National Accounts Statistics Mission
Author: International Monetary Fund. Statistics Dept.
Volume/Issue:
Volume 2018: Issue 079
Publisher:
International Monetary Fund
ISBN:
9781484347256
ISSN:
1934-7685
Pages:
23
DOI:
https://doi.org/10.5089/9781484347256.002

Double Deflation of Bhutan’s Annual GDP Statistics