Administrative Data

1. A range of administrative data are available from government agencies that are used or could be used by the Central Bureau of Statistics (CBS) to produce the GDP estimates, including registration data from the Chamber of Commerce; foreign trade data from the Customs Department; financial sector data from the Central Bank of Aruba (CBA); employment and earnings from the Social Security Bank (SSB), and tax system data/financial statements from the Tax Department (TD); and government accounts data from the Ministry of Finance, Economic Affairs and Culture (MFEC). Coverage of illegal activities can be improved using information from Customs and the Police Departments, on drug seizures and percentage of seizures compared to the estimated supply. The police could also provide information on other illegal activities. The CBS is expected to establish memorandum of understanding (MOU) with the relevant institutions as soon as practical, to assist with data sharing and implementing classifications, standards and quality assurance frameworks.

Agriculture and Fishing Data

2. The Agriculture and Fisheries Departments are significantly under-resourced, so very limited administrative and regulatory data are available, such as numbers of slaughtered animals by type of livestock. Given that the tax paying units data are available and these activities are insignificant, the CBS will need to rely on indicator data on imported inputs and more frequent Household Income and Expenditure Surveys (HIES), annual Labor Force Surveys (LFS), and the ten-yearly Census of Population and Housing to estimate these activities.

Central Bank of Aruba Data

3. The mission met with staff from the CBA to discuss the coverage, data quality and international standards relating to balance of payments (BOP) and monetary and financial statistics. CBA codes all financial institutions it regulates to International Standard Industrial Classification of All Economic Activities (ISIC) Revision 4 and institutional sector. The monetary and financial statistics provide good coverage of commercial banks. However, deposits and loans data for depository corporations other than commercial banks are not collected or provided to the CBS. Special purpose entities without physical presence, and other credit-granting (i.e., retail stores and money lenders) are also not covered. In the meantime, the CBS will need to collect financial data and stocks of deposits and loans data directly from the other depository corporations and credit-granting institutions. At this stage, the CBA regulates financial intermediaries only. However, its regulatory role is expected to be expanded to cover all credit granting institutions when the revised legislation is enacted.

4. The BOP is being produced on a quarterly and annual basis using a range of source data, including the International Transactions Reporting System, which is the core of the data collection of the CBS for the BOP. This reporting system comprises monthly reports on settlements between residents and nonresidents of Aruba made through intermediation of banks in Aruba, and quarterly reports by residents on settlements they make through intermediation of non-resident banks and on transactions settled through intercompany accounts and foreign investment accounts.

5. The reporting system is supplemented with quarterly surveys on portfolio investment and other investment, and an annual survey on direct investment. Banking transactions and CBA transactions are derived directly from balance sheets. The supplementary data sources are essential for the compilation of International Investment Position. The reporting system and supplementary surveys provide a good coverage of BOP transactions and IIP stocks as they are supported by foreign exchange regulations that impose licenses for outgoing payments and prescribe that accounts with non-resident banks and other accounts are reported to the CBA. The data on residents’ deposits with, and loans from non-resident banks and interest payable and receivable can be used to derive imports of financial intermediation services indirectly measured.

6. The additional data needed for full compliance with the Balance of Payments Manual 6^th Edition and System of National Accounts 2008 standards are available from these surveys; as well as from the CBS data sources, such as the International Merchandise Trade Statistics (IMTS) and the Tourism Expenditure Survey (TES). The CBA is planning to fully implement the standards by incorporating these source data into the BOP by 2022. These additional data will enable the compilation of the BOP on an accrual basis, as the cash-based reporting system does not provide that information. The direct investment survey provides information on retained earnings by direct investment enterprises, which has not been used for the compilation of reinvested income. Interest income on portfolio investment and other investment is available on an accrual basis, but this information is also not used for the compilation of the BOP. To the extent that the CBA has not implemented the Balance of Payments Manual 6^th Edition standards, the GDP by expenditure estimates produced by the CBS will be different to the current published BOP estimates being produced.

Government Accounts Data

7. Quarterly and annual government accounts data are provided to the CBS by the MFEC. Timeliness for detailed quarterly revenue and expenditure data at the organizational unit level can be provided by six weeks after the quarter. The mission and CBS staff met with the Director and staff of the Department of Finance to discuss data access, coverage, quality and standards. The coverage is for all of General Government. However, there can be significant delays in quarterly financial reporting and annual financial reports of extra-budgetary units. Tax revenues are recorded on a cash basis, expenses are recorded on a payments order basis, and capital expenditures and non-tax revenues are recorded on an accrual basis. Compensation of employees and purchases of goods and services data are available at a lower organizational unit level, such as sports and youth development, to be able to sort output, IC and GVA using the Classification of Function of Government. The coverage, and classification of revenue and expenditure needs to be improved in line with the Government Finance Statistics Manual 2014.

8. There is an inventory stock of government assets. All purchases of assets that can be used for more than one year and are valued at or above 2,500 Florins are added to the stocks, while sales of assets are deducted from the stocks. The Department applies business accounting standards regarding the life of the asset and uses historical cost for valuation. The classification of the assets is non-standard but there is enough information to classify the assets into buildings (including additions, alterations, and refurbishment); and transport equipment, ICT equipment, other machinery and equipment, furniture, and other durables. There is sufficient data for CBS to use to develop a perpetual inventory model for government, and price adjust the assets to develop better estimates of consumption of fixed capital (CFC).

International Merchandise Trade Statistics

9. The Customs Department provides detailed foreign trade exports and imports data to the CBS that is used to produce the IMTS. All imports into and exports and re-exports out of the economy are recorded (including the duty free zone) on a general trade basis. Adjustments are made for fuel imports not measured by Customs, as well as sales of fuel to non-resident carriers. In addition, the CBS industry codes the registered exporters and importers by ISIC Revision 4. The trade in goods data are correctly classified, adjusted for change of ownership and valuation, and correctly valued at free-on-board prices. All major equipment imports are reviewed to determine if they are financial or operational leases.

Social Security Bank data

10. The SSB earnings data are used extensively by the CBS in updating the business register, and for grossing up the financial statements based estimates for the non-financial sub-sector, NPISHs and formal sector household businesses. The SSB has data for around 3,500 employing units and 50,000 job holders, including employed persons with more than one job. The employer contributions are collected by TD on behalf of the SSB. Compliance levels are around 97 percent. Self-employed persons are not required to make social contributions but it is expected that the SSB will start collecting contributions from own-account workers in the medium-term. The employing units are not classified by industry and there is no coding of employees by type of occupation. Hours worked data are also not collected.

11. The need to establish a MOU between CBS and SSB is a high priority. The CBS can support the SSB in industry coding all employing units to the ISIC Revision 4, as well as occupational coding. As long as there is a unique identifier for each worker, it should also be possible to identify multiple job holders and consolidate these so that employment and wages statistics by main job and industry can be compiled and published on a quarterly basis. Support in developing risk management techniques (e.g., outlier analysis) to identify under compliance is also required but this will require the SSB also collecting hours worked per job/employee data.

Tax Department Data

12. Access by the CBS to financial statements submitted to the TD is absolutely critical for producing good quality GDP estimates. The CBS staff select and extract detailed information from the financial statements of the largest units for each industry. Unfortunately, the taxpaying units are not classified by industry. The CBS staff need to help the TD to code all the taxpaying units to ISIC Revision 4. Virtually all businesses are registered for the tax, with around 14,000 active units reporting monthly data. Of these, around 8,000 units are registered for company income tax. Some 4,000 units are large and medium taxpayer units. The turnover data correctly coded to ISIC Revision 4 would enable the CBS to improve its business register and quarterly GDP-P estimates in the medium-term. The turnover reported includes all sales, whether or not subject to the turnover tax. However, the timeliness of reporting to the TD needs to be improved in order for the data to be available to the CBS within 8 weeks after the reference quarter.

13. The mission and CBS staff met with the TD staff to discuss data access, classification and quality issues. The CBS currently has access to monthly data from the turnover tax system, as well as financial statements and reports provided to the TD by taxpayer units. The TD is currently implementing a modernization strategy, to be completed by 2020, to improve online lodgment, compliance and management information systems. Currently, timeliness of reporting is monitored and a tax audit system is in place to improve tax payments. It is intended that taxpayer units will enter financial statement information online. As reports are filed at the enterprise group level for around 200 businesses, it is necessary for the CBS to use financial statements data to prorate the turnover across the different ISIC activities. It will be essential that the TD ensures that these large taxpaying units continue to provide the detailed establishment level data to TD online.

14. The need to update the MOU between CBS and TD has been agreed. The TD is interested in receiving CBS support in industry coding all taxpayer units to the ISIC Revision 4 that can be extended to occupational coding of personal income tax payers. Support in developing risk management techniques to identify tax minimization is also required. There is scope for the TD to modify its online forms to include requiring taxpayer units to regularly update their primary and secondary economic activities to ensure correct industry allocation and to improve outlier analysis and risk assessment. The CBS staff need to review all the online tax forms in detail and provide advice to the TD on additional data needed to improve data quality and compliance.

Tourism Surveys and Immigration Data

15. The CBS conducts a monthly TES of cruise ship passengers and stayover tourists. The sample for cruise ship passengers is around 1,800 a year, and a sample of 4,500 stayover tourists a year. A returned resident travelers survey has also been conducted since October 2018. The cruise ship passenger is sufficient. The stayover tourists sample provides very good coverage of tourists from Europe and North America, but the sample needs to be increased to 500 interviews per month to improve the coverage of tourists from other destinations.

16. The Aruba Tourism Authority works closely with the Immigration Department to process the data from the immigration cards. The official from the Authority was very confident about the quality of the immigration data. While visitors can provide their information through an online form, the Immigration Department does flag visitors from some countries requiring them to speak to an Immigration Officer on arrival. There is attention given to ensuring that residents are recorded as residents and non-residents as visitors. While there have been delays in data processing due to resource constraints, the Authority is improving processing rates and expects to be able to provide CBS with monthly data within eight weeks from June 2020 onward. The Authority also surveys tourists, although the information collected is more geared towards promoting tourism to Aruba. The need to establish a MOU between CBS and the Authority is a high priority in order to combine the TES with the Authority’s survey, and to collaborate on developing and improving tourism statistics.

Business Register and Surveys

17. The CBS maintains a business register of around 3,800 institutional units that was updated using the 2014 Economic Census and is maintained using new employer registrations with the SSB, as well as by monitoring the media and Internet for changes in structure and activities of the 200 largest business units. Careful attention needs to be paid to splitting out credit granting activities of some retailers of appliances and furniture. The SSB registration, employment and earnings data allows for regular and reasonably comprehensive updating of the employment and earnings variables. However, the register needs to include the turnover variable available from the TD system.

18. The business register should be strengthened using the TD registration, financial and turnover data for registered taxpayer units, once all the taxpayer units have been properly coded to ISIC Revision 4. The CBS should use turnover from the TD in preference to earnings for grossing up financial statements data or business survey results. The proposed strategy is to use the feedback from the Chamber of Commerce initially, and then use the SSB and TD registers to help keep the CBS business register up to date. Units on the business register would constitute the formal sector; with data for other units (i.e., own-account workers) from the Census of Population and Housing, HIES and LFS used to measure informal sector and subsistence activities.

19. The CBS needs to conduct a quarterly partial coverage National Accounts Survey (NAS) of the largest 200 businesses and 20 largest non-profit institutions serving households (NPISHs), supplemented by an annual sample survey of around 500 medium and small businesses and NPISHs. The survey is needed to collect more accurate data, including changes by type of inventories, to correctly calculate output and IC, as well as changes in inventories and gross capital formation. In addition, industry specific volume data by main products can be collected.

20. The annual sample would be selected from the updated business register for the annual NAS, including 250 medium and 250 small business units using turnover for businesses and earnings for NPISHs. The annual samples would need to be determined at the industry level to complement the quarterly survey and ensuring that representative responses are available by industry. The medium and small business units would remain in the NAS sample for three years before being rotated out, although the two-thirds of the first sample will be in for four to five years. Separate forms will be needed for different industries, to capture their different outputs and volume data.

21. To improve the response rates for the NAS and any other economic surveys, the Impact 4–2-1 methodology should be implemented. This involves reminder/follow-up action that is four times greater for large units and twice more for medium sized units than for the small units. For the largest units, this would involve four reminder actions before the official notice of direction letter (copied to the Director of Public Prosecutions) is sent by the CBS Director to the non-responding unit. The first reminder email/visit would be dealt with by the lower level staff, the second reminder would be via telephone/visit by the supervisor, the third reminder via telephone by the Division Head and the fourth via telephone by the CBS Director. This is because the response rate targets for the large units needs to be 100 percent even if the data provided are partial. The response rates for these units in terms of completed forms should be 90 percent for preliminary results (as opposed to getting basic indicators/partial data) within three months after the reference year and 100 percent for the final results. For medium sized units there would be two reminders (also escalated), as the response rates need to be around 70 percent for preliminary and 80 percent for the final results. For small units (that will be largely homogenous for most industries) there would only be one reminder, as response rate targets are around 50 percent for preliminary results and 60 percent for final results. This approach would ensure the CBS is focusing the limited resources on ensuring the largest contributors to GDP respond.

Household Surveys

22. The CBS conducted a HIES during May and June 2016. Approximately 1,891 out of a sample of around 2,000 households responded to the survey. Aside for the known problems with non-response by wealthy households, the CBS methodologists have reviewed the reported data for non-response bias and made non-response estimates. Consumption per capita or household was used to verify the estimates. In addition to monetary purchases, data on backyard and subsistence production of agricultural products for own final use were also collected. The CBS also conducts an annual LFS with a similar sample size.

23. The CBS Director has agreed to conducting the next HIES, timed for 2021, over the whole of the calendar year, following discussions on the benefits in terms of capturing seasonality, ensuring good quality data collection due to the more skilled but fewer enumerators collecting information continuously over the calendar year, reduced supervision requirements and more easily managed logistics. Using tablets would also mean the edited output data can be produced within a moth after the field phase is concluded.

24. For the informal sector, the proposed approach is to calculate values per informal sector worker by industry multiplied by the number of these workers from the Census and grossed up HIES – if conducted through the year – or LFS, if not. Additional questions need to be added to capture expenses data for informal sector own-account workers, using the informal sector module questions provided by the mission. The HIES and LFS questionnaires also need to be amended to collect information on secondary paid activities/jobs, as these would be informal (e.g., art, handicrafts, tutoring, after school care). The HIES and LFS data on own-account workers without employees not registered with the TD, along with data on their revenue and expenses can be used to calculate output and GVA per informal sector worker by industry. The data per worker by industry will then be multiplied by the number of these workers from the Census.

Benchmark Studies and Surveys

25. The current funding model for the CBS requires bidding for additional resources for major surveys like the HIES. This often results in delays in financing that then adversely impacts on the frequency of the rebasing of the CPI and the GDP. The adoption of the international best practice model of having a continuous survey program is recommended. This involves five-yearly program of censuses and surveys. Following the 2020 Census of Population and Housing, the CBS would conduct a Household Income and Expenditure Survey (including an informal sector module) in 2021; Economic Census in 2022; National Health, Nutrition and Welfare Survey in 2023; National Education and Social Indicators Survey in 2024. The next 5-year cycle would commence with the Inter-Census Demographic Survey in 2025, with each of the above mentioned benchmark surveys being repeated. It would provide more certainty in terms of rebasing the CPI and GDP, as well as meeting the benchmark monitoring needs of various key data users (e.g., for the Sustainable Development Goals) and policymakers on regular basis.

26. The CBS needs to conduct studies during 2021 to collect data by SUT product group on the trade and transport margins, and to update construction industry costs and mark-ups by type of construction. It is expected that the gross trade and transport margins can be derived by deducting the import or producer unit price plus percent taxes from the equivalent CPI price of products. However, the trade margins study will still be needed to split out the trade margins and identify any differences in business versus household prices. It should be based on a small sample of the largest supermarkets and specialty stores, and collect margins for broad categories of goods as classified in the SUT. The percentage of goods traded can be derived using the methodology explained during the mission of using IMTS data classified by ISIC Revision 4 to get ratios at the Harmonized System (HS) product level of direct imports versus imports by wholesalers and retailers. It can be assumed that the agents acting on behalf of importers are split similarly. The value of the splits can then be aggregated from HS to CPC and then to the SUT product level. The construction study is required so that the CBS can produce separate benchmark estimates for construction of dwellings, commercial properties, and civil works.

Prices and Price Indices

27. The monthly CPI series (June 2019=100) is based on the 2016 HIES expenditure weights and classified using the Classification of Individual Consumption According to Purpose. The prices coverage is the whole of the country and the CPI is released within three weeks after the reference month. In addition to the update of expenditure weights, the CBS updated the products being priced, sample of outlets, and reviewed the frequency of prices collection, based on the HIES two-week households’ diary data. The frequency of prices collection is adequate and consistent for most priced products. However, there is considerable scope for improvement.

28. The CBS does not have a rental of dwellings survey, instead it uses inter-Census and HIES trends. Implementing a quarterly rentals survey is a high priority. The CBS needs to start collecting rates for accounting, cleaning, gardening, financial, and legal services; as well as wages of builders, carpenters, electricians and plumbers. The wages and earnings collection could be coordinated with the Labor Department that also collects earnings and hours worked. Use of the annual LFS data could also be investigated, as that also collects hours worked. In addition, the CBS needs to introduce proper imputation for missing prices and make quality adjustments. The alternate to quality adjusting is to use US CPI indices for telecommunications and ICT equipment. The final expenditure weights can also be improved by properly adjusting the HIES data for the usual areas of under-reporting, such as alcohol, tobacco, computer, electronics and telecommunication equipment, luxury goods and gambling by cross-checking with supply side data sources and using weights from a balanced SUT. The CBS needs to request a CARTAC price statistics capacity building mission for June 2020.

29. The CBS needs to develop of monthly or quarterly import price indices, at least for the more homogeneous products. To improve the construction industry and possible wholesale and retail trade industry estimates, the CBS needs to use the CPI field team to commence collecting building materials prices for bathroom ceramics, steel rods and sand and gravel; and selected import prices for heterogeneous products.

ISIC A. Agriculture, Forestry, and Fishing

3. The current contribution to GDP of the crops, livestock and fishing industries is very small. There are no administrative production data. Agriculture, fishing and quarrying activities are combined. There is no forestry activity. The CPV estimates are based on sparse data on formal sector activities from financial statements, grossed up using earnings data from the Social Security Bank (SSB). The 2016 Household Income and Expenditure Survey (HIES) consumption of own produced agriculture products has been used to improve coverage. The SSB earnings and TD turnover data are available to compile the quarterly CPV output estimates.

4. The CPV estimates for agriculture crops can be deflated using the CPI for fruit and vegetables to derive the KPV output estimates. Separate data on quantity for animals slaughtered are available to compile the KPV estimates. If not timely, the adjusted CPI for meat and poultry could be used as a deflator for livestock. The annual KPV output, IC and GVA estimates would be derived as the sum of the quarterly KPV estimates. The quarterly CPV output estimates would be benchmarked to the annual CPV IC estimates to derive the quarterly CPV IC estimates, with the GVA derived as the residual. The adjusted CPI for fresh fish can be used as the price deflator for fishing.

ISIC B. Mining and Quarrying

5. Financial statements and turnover data are available to compile the annual and quarterly CPV estimates. The output can be deflated using the adjusted CPI for sand and gravel or the materials used for dwelling repairs, if necessary. Once the National Accounts Survey (NAS) is implemented, quarterly production volumes of sand, stone and gravel should be collected.

ISIC C. Manufacturing

6. The manufacturing activities include production of bakery products, other food products, beverages, wearing apparel, paper and wood products, printing, petroleum refining (now ceased), chemical products, concrete products, fabricated metal products, boat building and repairs, furniture, handicrafts and jewelry, and other manufacturing. The CPV estimates for the refinery and all other manufacturing are compiled using financial statements and earnings data. The preference is to use volume indicators for output products that are largely homogenous, such as beer, rum, other types of alcohol, soft drinks, bottled water, and cement.

7. In the absence of suitable volume indicators, the proposed price deflators include adjusted CPI for bread and bakery products for bakeries, CPI food, CPI for non-alcoholic beverages, CPI for beer, CPI for wine and spirits, composite weighted CPI for textiles, wearing apparel and footwear, and CPI books and newspapers for paper products and printing. For each of the other industries’ producing building materials, use the elementary price indices for wood products, paints and varnishes, rubber and plastic products, glass, concrete and other non-metallic products, and fabricated metal products used to produce the CPI for materials used for dwelling maintenance and repairs. Use the various adjusted CPI for pharmaceuticals, medical appliances, household appliances, vehicle parts, computers, telecommunication equipment, sports and recreation goods, furniture, jewelry, and other goods to deflate the CPV output estimates for pharmaceuticals, medical appliances, machinery and equipment, ICT equipment, vehicle spare parts, furniture, jewelry, and other manufactures.

8. The NAS should be used to collect detailed level quarterly volume data (where the prices are not representative or where the SSB employment numbers are small and unstable) to compile the quarterly KPV estimates. For example, the volume of bread, beer, rum, bottled water and soft drinks, and paints. To the extent possible, the quarterly estimates should be compiled at the same level of detail as done for the annual compilation. For cases where a quarterly volume indicator is not available, use the TD turnover data can be used as a value indicator to derive the quarterly CPV estimates; with the relevant CPI used to deflate the CPV estimates to derive the annual KPV estimates.

ISIC D. Electricity, Gas, Steam and Air Conditioning Supply

9. The financial statements data are used to compile the CPV output, IC and GVA estimates, with KWHs data available by type of consumer from the suppliers to compile the annual and quarterly KPV estimates. SSB earnings and TD turnover data are available to compile the quarterly KPV estimates. The CBS needs to develop estimates of electricity generation by businesses and households for own use for the next SUT.

ISIC E. Water Supply, Sewerage and Waste Management Activities

10. For water supply, sewerage and waste management, financial statements data are used to compile the annual CPV estimates, with turnover and earnings data available as value indicators to benchmark to the annual estimates to compile quarterly CPV estimates. Water supply volume data by type of consumer are available to compile the annual and quarterly KPV estimates. If possible, the sewerage activities should be estimated separately. The number of consumers billed for sewerage can be used as the volume indicator for sewerage. The estimates for the private industrial and solid waste management companies is included here in ISIC Revision 4, with employment data available to compile the quarterly estimates. However, the coverage of informal own-account refuse/waste truck operators needs to be improved.

ISIC F. Construction

11. The annual CPV estimates for construction are compiled using the financial statements and earnings data. The commodity flow approach using detailed domestic output and imports of construction materials and the 2013 SUT ratios and weights should be used to derive the CPV and KPV estimates. The mission explained the methodology in detail and provided a worksheet template for compiling construction quarterly CPV and KPV estimates, with the annual estimates derived by summing the quarterly estimates; as well as the related repairs and maintenance and gross fixed capital formation (GFCF) estimates.

12. The annual financial statements and NAS data would be used to update the CPV I/O ratios moving forward from the 2013 SUT ratios. All imports of the relevant codes for construction materials would be included using the international merchandise trade data for value, including product cost, insurance and freight plus import duties and other taxes, and the turnover tax. Trade margins would then be applied. The local production of sand, gravel, wood, paints and varnishes, glass and concrete products, and fabricated metal products, less any exports, and adjusted for taxes and trade margins would be added to derive total construction material inputs. Deductions to imports for materials used in producing domestic concrete, wood and fabricated metal products should be based on extrapolating the 2013 SUT estimates using the CPV and KPV IC for those domestic industries. Mark-ups are then applied to derive the CPV IC and GVA components, as well as the total output estimates. The CBS needs to conduct a construction study, employing the services of a quantity surveyor, to develop estimates of materials, services and labor inputs; as well as profit margins by type of construction (i.e., dwellings, other buildings and civil works) for the 2018 SUT.

13. The methodology groups the CPV construction materials to align with the product level price indices from the CPI or based on any additional building material prices collected for sand and stone, steel bars, and ceramic bathroom and kitchen products. The CBS already collects quarterly prices for a wide range of building materials and some services used to produce the CPI for dwellings repairs and maintenance. For other non-construction goods and services such as, electricity, water, hire of equipment, fuel, machinery/vehicle repairs and maintenance, legal and accounting services, various adjusted CPI can be used as proxy price deflators and the services CPI can be used for other services. A construction industry wage index based on employment and earnings data can be produced and applied to the CPV COE component. The profit margin can then be applied to the aggregated COE and IC components to derive the remainder of the CPV and KPV GVA. The same methodology can be used to compile the quarterly estimates; with the annual estimates being the sum of the quarters’ estimates.

ISIC G. Motor Vehicle Sales and Repairs, and Wholesale and Retail Trade

14. The annual CPV gross margins/output estimates for wholesale and retail trade are compiled using the financial statements and earnings data, with turnover data used as a proxy value indicator to compile the quarterly CPV gross margin estimates. The estimation methodology can be improved by implementing the commodity flow approach to compile the quarterly and annual KPV estimates at a disaggregated product group level. The motor vehicle repairs industry estimates are compiled separately from the various wholesale and retail trade industries.

15. The quarterly CPV and KPV output estimates for agriculture, fishing, quarrying, and the various manufacturing industries can be adjusted to remove the non-traded component (i.e., own consumption or where sold and delivered by the producer to the final user directly using the 2013 SUT product level ratios of traded and non-traded) and then used to extrapolate the 2013 base year estimate of output sold through traders domestically or exported to derive the volume indicators. The non-refundable product taxes would then be added. To this would be added the CPV of traded imports (i.e., adjusted to remove imports by end users directly, with excise, import duties and other non-refundable taxes added). The traded imported goods would be grouped into categories corresponding to the equivalent proxy CPI and deflated to derive the equivalent KPV estimates – until import price indices are available. Different margin rates should be applied by type of broad product group (e.g., fresh fruit and vegetables versus building materials). The domestic and imported components would then be added and used as value indicators to benchmark to the annual CPV gross trade margins to derive quarterly CPV gross margin estimates. The equivalent quarterly volume indicators would be benchmarked to 2013 SUT gross trade margins to derive quarterly KPV gross margin estimates. The annual financial statements data would continue to be used to derive and apply the I/O ratios to derive CPV IC and GVA; with the base period I/O ratio used to derive the KPV IC and GVA estimates. Import volumes of fuel and lubricants by the main distributors can be used as a volume indicator to extrapolate the 2013 SUT benchmarks for gas stations to derive quarterly and annual KPV gross margin estimates.

16. Annual CPV output, IC and GVA estimates for sales of vehicles and parts are based on financial statements and earnings data. The quarterly CPV estimates would be derived by benchmarking the turnover data to the annual CPV estimates. The compiler can use the adjusted CPI for purchases of vehicles and spare parts to deflate the quarterly CPV estimates based on turnover data to derive the quarterly KPV output estimates. The annual KPV output estimates can be compiled by summing the quarterly estimates. Financial statements and earnings data are used to compile the annual CPV vehicle maintenance and repairs estimates, and the turnover data can be used as a value indicator benchmarked to the annual CPV estimates to produce the quarterly CPV estimates. These CPV estimates can then be deflated using the CPI for vehicle repairs and maintenance to derive the quarterly KPV estimates.

ISIC H. Transport and Storage

17. The financial statements and earnings data are used to compile the annual CPV estimates for transport and storage, except for minibuses and taxis. For minibuses and taxis, the number of licensed/registered operators multiplied by benchmark 2013 estimates of output and GVA are used to derive the KPV estimates. The CPV output estimates for taxis are based on Tourism Expenditure Survey (TES) data with a 2.5 percent coverage adjustment for residents using these services. A volume indicator of cruise ship passengers and stayover tourist bed-nights is used to extrapolate the tourist expenditure benchmark estimate to derive the KPV estimates. For minibuses, the base year estimates are extrapolated using population growth to derive the KPV estimates, and any changes in fares are applied to derive the CPV output estimates. A fuel price index is used to adjust the KPV IC to derive the CPV IC for both.

18. The quarterly CPV output estimates for the tourist component can be compiled by multiplying the average land transport expenditure per cruise ship passenger by the number of cruise ship passengers, and the expenditure per stayover tourist by the number of stayover tourists. This can be deflated using the CPI for taxis and the CPI for minibuses to get the equivalent quarterly KPV output. The resident passengers’ component can be derived by extrapolating the resident 2013 benchmark expenditure estimate for taxis and for minibuses using population growth to compile the quarterly KPV output estimates of each and then reflated using the CPI for taxis and the CPI for minibuses to derive the quarterly CPV output estimates. The benchmark 2013 I/O ratios can be used to derive the KPV IC and GVA as a residual. The KPV IC can be reflated using the composite weighted IC price index to derive the quarterly CPV IC that can be deducted from the CPV output to derive the CPV GVA for both. The annual CPV and KPV estimates would be the sum of the quarters’ estimates.

19. For road freight transport, the CPV estimates are based on financial statements and earnings data. The non-fuel cargo (or containers) volumes for exports and imports should be used as a volume indicator to estimate the annual and quarterly KPV output. The annual CPV IC would be deflated using a composite IC price index to get the annual KPV IC, with KPV GVA derived as the residual. If the same composite IC price index cannot be used for quarterly estimates, the quarterly KPV output estimates can be benchmarked to the annual KPV IC to derive the quarterly KPV IC estimates, with the KPV GVA derived as a residual. The transport CPI can be used to reflate the quarterly KPV output to derive the quarterly value indicator to benchmark to the annual CPV output to derive the quarterly CPV output estimates.

20. The CPV estimates for the foreign airline offices (using the sum of costs approach) are compiled using financial statements and earnings data. For foreign airline operations, the number of employees should be used to derive the annual and quarterly KPV estimates. For quarterly CPV estimates, the CPI for airfares can be used to reflate the quarterly KPV estimates to derive a value indicator to benchmark to the annual CPV estimates.

21. The financial statements and earnings data are used to compile the CPV estimates for the airport and port activities. The KPV estimates can be produced using a composite volume indicator of air passengers, cargo and aircraft movements for the airport and air support services; and a composite volume indicator of passengers, cargo and ship movements for the harbor/port activities.

22. For freight agents, tour operators and travel agents the CPV estimates are derived using financial statements and earnings data. The KPV estimates will be based on the same indicators as for the airport and port. Only the cargo volume indicators should be used to derive the KPV estimates for freight agents and forwarders, with turnover used as the value indicator for quarterly CPV estimates. The government accounts data are used to compile CPV estimates for postal and financial statements and earnings data are used for courier services. The turnover data can be used as the value indicator for quarterly CPV estimates, with freight volumes or employment used to derive the annual and quarterly KPV estimates. If adequate quality turnover data are not available, the transport CPI can be used to reflate the KPV estimates to derive the value indicator to benchmark to the annual CPV estimates to derive the quarterly CPV estimates.

ISIC I. Accommodation and Food Service Activities

23. The annual CPV estimates are derived from the financial statements and TES tourist expenditure data, adjusted for resident expenditure using the 2013 benchmark estimates. The CBS plans to use a weighted volume index of tourist bed-nights to derive the annual KPV estimates for hotels and deflation using the CPI for outside consumption of beverages and meals for restaurants. The CPI for events catering will be used for deflating CPV estimates for conferences and events. The same demand-side methodology can be used quarterly to produce value and volume indicators to benchmark to the annual estimates to derive the quarterly CPV and KPV estimates.

ISIC J. Information and Communication

24. For telecommunications and cable TV, the annual CPV estimates are compiled using the financial statements and earnings data. As the CPI for communications is not quality adjusted and employment is not a good volume indicator for this industry group due to the significant technological changes, the preference is to use volume indicators such as internet downloads, and fixed and mobile phone call minutes to derive the annual KPV estimates. A better approach is to extrapolate the base 2013 output for each type of service using the relevant annual/quarterly volume indicators (e.g., fixed lines and calls, mobile phone call minutes, internet down loads/usage, and cable TV subscriptions) sourced from the companies or the regulator, given that the real growth in recent years has been in internet services. If this is not possible, it may be better to use the US price index for telecommunications as a proxy price deflator.

25. The financial statements and earnings data are used to compile the annual CPV estimates for publishing, and audio-visual broadcasting services. For the KPV estimates, it would be best to collect prices data on advertising slots to derive a price deflator. Otherwise, use the CPI for newspapers to deflate rather than using employment data to extrapolate. For audio-visual production and distribution activities, and computing and related activities, the financial statements and earnings data is supposed to provide adequate coverage. The CPI for cinemas should be used for cinemas. The SSB employment data can be used as volume indicators for the KPV estimates, or else the CPI for services as a deflator. The quarterly turnover and earnings data can be used as value indicators to derive the quarterly CPV estimates.

ISIC K. Financial and Insurance Activities

26. Financial sector data sourced from the CBA, financial statements and earnings data are used to compile the CPV estimates. For the CBA, employment can be used as a volume indicator to derive the KPV COE estimates, with the CPI for major appliances and composite IC price indices used to derive KPV CFC and IC. The imputed bank services charges method (i.e., interest receivable less interest payable) was previously used but the CBS have since developed the worksheets to compile FISIM for banks and other financial intermediaries. The compilation methodology was improved during the mission to use the mid-point reference rates and improve the partial allocation between IC and GDP-E expenditure components. The KPV FISIM estimates are to be derived by extrapolating the benchmarks using deflated loans and deposits of commercial banks that are deflated using the All Items CPI. Then explicit fees and charges and other operating income CPV and KPV (again using All Items CPI) are added to compile total CPV and KPV output. The CPV IC and GVA are based on source data; with the KPV IC derived using a composite IC price deflator and the GVA being derived as a residual. There is a need to improve the coverage of, and collect deposits and loans data for, non-bank financial institutions.

27. The mission provided advice on calculating and allocating FISIM by institutional sector. The 2008 SNA states that a general measure of inflation should be used to deflate deposits and loans, so the All Items CPI can be used to deflate the value of quarterly deposits and loans to derive quarterly and annual (sum of quarters) volume indicators. As practiced in other countries such as Australia and New Zealand, the SNA interest rate can be derived using the mid-point of the weighted interest rates on deposits and loans. The SNA rate is applied to the average of the opening and closing stocks of deposits for the quarter to derive the SNA interest payable for the quarter. From this estimate the actual interest payable is deducted to derive the FISIM on deposits. Similarly, the SNA rate is applied to the average of the opening and closing stocks of loans and advances for the quarter to derive the pure interest receivable for the quarter that is then deducted from the actual interest receivable to derive the FISIM on loans and advances. The respective 2013 benchmark estimates of FISIM on deposits and FISIM on loans are then extrapolated using the deflated value of deposits and loans using the All Items CPI to derive the respective KPV FISIM estimates.

28. The CPV FISIM is then added to other CPV operating income to derive the total CPV output estimates. The All Items or services CPI can be used to deflate other operating income, depending on the type of income, to derive other operating income KPV to compile total output. The CPV IC estimates can then be compiled from the source data and a composite IC price index used to derive the KPC IC estimates; with the CPV and KPV GVA estimates derived as residuals.

29. The FISIM on loans for corporations is allocated to industry IC using the data on the value of loans by industry, with FISIM on deposits allocated to industry using a composite indicator of the sum of output and IC by industry (i.e., as most deposit accounts would be working accounts not investment deposits). FISIM on mortgages is added to real estate IC. FISIM for Government and NPISHs is added to both IC and output in the public administration and other relevant workbooks reflecting the sum of costs approach for output, as the final consumption expenditure for Government and NPISHs is calculated using the output adjusted for sales. FISIM attributable to non-residents and to households for deposits and non-mortgage loans are to be allocated to exports of services and household final consumption expenditure respectively.

30. For other financial services, the CPV estimates are based on financial statements and earnings data. The KPV estimates can be derived using the CPI for financial services or all services, otherwise an employment volume indicator can be used. The coverage of special purpose entities without physical presence needs to be investigated. The CPV estimates for the special purpose entities can be compiled using the sum of costs approach by adding the financial fees paid to the CBA or government that are basically other taxes on production, plus any COE and CFC to derive the GVA, plus any IC based on payments for accounting, legal and other services and any other inputs where there is a physical presence like electricity, rent and so on. The KPV estimates can be derived using the All Items or services CPI.

31. The CPV output for insurance companies is based on financial statements data and the 2008 SNA compilation methodology. The annual and quarterly KPV estimates can be compiled by using the stock of registered motor vehicles, dwellings and cargo volumes for non-life vehicle, building and freight insurance; or the deflated value of the non-life insurance policies using the price index for the underlying asset being insured (e.g., construction implicit price deflator). For life insurance, the deflated value of life insurance policies (using the All Items CPI) can be used as a volume indicator. The commission fees paid by insurance companies and shown in their financial statement are paid to local insurance agents that are not covered. These fees should be treated as CPV output of the agents and data should be collected to estimate IC and GVA. The services CPI can be used as a deflator or SSB employment used as a volume indicator to derive the KPV estimates.

ISIC L. Real Estate Activities

32. The Census of Population and Housing, HIES, electricity connections, financial statements and earnings data are all used to compile the CPV estimates for owner-occupied and rented dwellings, commercial property rentals, and real estate agents. For rented and owner-occupied dwellings, the dwellings are sorted by type, geographic area and size before applying the actual rents. Benchmark rents data for 2010 from the Census and for 2016 from the HIES are interpolated and used for 2013 onward. The CBS needs to conduct a quarterly rental of dwellings survey. The base 2013 rents are applied to the volume change in dwellings to derive the KPV rental values. For commercial property rentals, the CPV estimates can be improved by including government rentals as well as the IC on rentals by businesses sourced from the financial statements’ expenses data. Also, it would be better to use this as a value indicator to extrapolate the 2013 SUT estimate as that estimate should have even broader coverage.

33. The CBS plans to use 90 percent of new electricity safety certifications to move the volume indicator of number of dwellings used to compile the KPV estimates. The mission explained an improved methodology and provided an example workbook that could be used that uses the inter-census growth rate to work out what percentage of the new electricity connections should be used to move the volume indicator as the 90 percent ratio likely overestimates the growth of dwellings. Also, the 2013 benchmark estimates for commercial property rentals can be extrapolated the same way to derive the KPV estimates using the quarterly inter-census trend rates in the growth of commercial properties. The CPI actual rents can be used to reflate the KPV estimates to derive the annual and quarterly CPV output estimates, with the financial statements I/O data used to derive the annual CPV IC and GVA. The total movement in the commercial and dwelling KPV estimates can be used as a volume indicator to derive KPV estimates for real estate agents and property managers. The turnover and earnings data can be used as the quarterly value indicator for these agents and managers to derive the CPV estimates.

ISIC M. Professional, Scientific and Technical Activities

34. The financial statements and earnings data are used to compile the annual CPV estimates. The annual and quarterly KPV output and IC estimates can be derived using the CPI legal services and CPI services to deflate CPV output and a composite IC price index to deflate CPV IC. Given the variance in productivity levels for these industries, using an employment volume indicator may not be appropriate. As this industry includes accounting, auditing, legal and other professional services, it should be possible to use the turnover (or earnings) data as a value indicator benchmarked to the annual CPV estimates to compile the quarterly CPV estimates. The quarterly CPV output estimates can be deflated using the same CPI deflators to produce a volume indicator to benchmark to the annual KPV estimates to derive the quarterly KPV estimates.

ISIC N. Administrative and Support Service Activities

35. The annual CPV estimates are compiled using the financial statements and earnings data for these industries. As this industry includes rental of durable goods, machinery and equipment; building cleaning, gardening and landscaping, security services, and other business services, it should be possible to use the turnover data benchmarked to the annual CPV estimates to derive the quarterly CPV output and IC estimates, with the GVA derived as a residual. The CPV output and IC would then be deflated using the relevant CPI for major appliances, cleaning, gardening or services, to derive the KPV output and a composite IC price index to derive the KPV IC estimates, with the KPV GVA derived as a residual. The same price indices can be used to deflate the quarterly CPV output to derive a volume indicator to benchmark to the annual KPV output and IC estimates to derive quarterly KPV estimates.

36. For rentals of vehicles, the annual CPV estimates can be deflated using the transport CPI and a composite IC price index to derive the KPV estimates. The turnover or earnings data can be used as value indicators to compile the quarterly CPV estimates; deflated using the transport CPI to produce a volume indicator to benchmark to the annual KPV estimates to derive the quarterly KPV estimates. Quarterly registration of rental vehicles could also be used as a volume indicator for the KPV estimates. Data on the number of patents and copyrights and royalty payments can be used as the quarterly volume and value indicators benchmarked to the 2013 estimates to produce the annual and quarterly estimates for licensing of intangible assets.

37. It would be better to use TES data as a quarterly value indicator for tour operators and a composite volume indicator of cruise ship passengers and stayover tourist bed nights as a quarterly volume indicator to benchmark to the annual CPV and KPV estimates to derive quarterly estimates. As travel agents provide services mainly to residents, the turnover data can be used as the value indicator and resident departures as a volume indicator to derive the quarterly estimates. For the other administrative and support service activities, the turnover data can be used to derive the annual and quarterly CPV estimates, with the employment used as a volume indicator to produce the quarterly KPV estimates.

ISIC O. Public Administration; Compulsory Social Security Activities

38. For government services, the CPV estimates are based on government accounts data. The sum of costs approach is used to add COE, CFC and IC components to derive the output estimates. For the SSB, annual financial data provided by the SSB is used to derive the CPV estimates. An employment indicator is used to derive the government and SSB KPV estimates. The same methodology is used for public education, health and social work.

39. As discussed during the mission, the compilation workbook needs to be redeveloped to include detailed annual and quarterly CPV estimates of output, IC, GVA and final consumption expenditure by Classification of the Functions of Government and ISIC Revision 4 based on quarterly and annual Government accounts data. The KPV estimates would be derived by separately for CFC, COE and IC components, including FISIM. The CBS needs to collect the relevant wages and employment by level data from MFEC to develop and use a weighted wage index to better deflate the CPV COE estimates to derive the KPV COE estimates. The detailed expenses on other goods and services in the government accounts can be aggregated into the various expenditure products, with the best proxy adjusted CPI (i.e., 2013 = 100) used to deflate the estimates to derive the KPV estimates.

ISIC P. Education

40. The annual CPV estimates for private education are derived from the financial statements and earnings data; with the KPV estimates compiled using the adjusted CPI for education. The employment data can be used as a volume indicator benchmarked to the annual KPV estimates to derive the quarterly KPV estimates. The turnover data can be used as a value indicator to derive the quarterly CPV estimates, or the quarterly KPV estimates can be reflated using the CPI for education and benchmarked to the annual CPV estimates. The annual CPV and KPV estimates for public education are compiled using the same approach as for public administration. Coverage of informal sector and after hours provision of private tutoring services, music and other non-formal education needs to be improved using Census, HIES and LFS data, as long as secondary jobs are identified.

ISIC Q. Human Health and Social Work Activities

41. The financial statements and earnings data are used to compile the CPV estimates for private human health and social work, including aged care. Various medical services CPI can be used to compile the annual KPV estimates. For child care services, data on average care costs, child care center registration and the population of children up to four years old is used to derive the CPV and KPV estimates. The employment data can be used as a volume indicator benchmarked to the annual KPV estimates to derive the quarterly KPV estimates, and then can be reflated using the CPI for medical services rather than using the turnover data as a value indicator to derive the quarterly CPV estimates, if the coverage is inadequate. As most social work will be done by NPISHs, the KPV estimates can be compiled using employment as a volume indicator to derive the KPV estimates; with the adjusted CPI for social protection or hired care being used to reflate the KPV output estimates to derive the CPV output estimates. The annual CPV and KPV estimates for public health and social work are compiled using the same approach as for public administration.

ISIC R. Arts, Entertainment and Recreation

42. The annual CPV estimates are compiled using the financial statements and earnings data. For gambling, the tax on winnings is used as a value indicator. Some but not all prostitution services are covered using visa permits data for the number of sex workers sponsored by bars, by number of clients, days worked, and average price per client data. Other non-observed prostitution is not measured but could be estimated based on information normally available to the police. There is also a need to measure the value of recreational/charter fishing and add that here. There is scope to improve the methodology by compiling the estimates at a more detailed ISIC level. Where possible, turnover data can be used as a value indicator benchmarked to annual CPV estimates to derive the quarterly CPV estimates. Where more representative volume indicators (e.g., gym and sports club memberships) are not available, the employment data can be used as a volume indicator to extrapolate the 2013 estimates to compile the quarterly KPV output estimates, with the 2013 I/O ratios used to derive the KPV IC and GVA estimates. Where turnover data are not available, the quarterly KPV output estimates can be reflated using the CPI for cultural and recreational services to produce quarterly value indicators to benchmark to the annual CPV output and IC estimates to compile the quarterly CPV estimates.

ISIC S. Other Service Activities

43. The annual CPV estimates are compiled using the financial statements and earnings data. The methodology can be improved by compiling the estimates at a more detailed ISIC 4-digit level. Where possible, turnover data can be used as a value indicator benchmarked to annual CPV estimates to derive the quarterly CPV estimates. Where more representative volume indicators (e.g., number of deaths) are not available, employment data can be used as a volume indicator to extrapolate the 2013 estimates to compile the quarterly KPV output estimates, with the 2103 I/O ratios used to derive the KPV IC and GVA estimates. Where turnover data are not available, the quarterly KPV output estimates can be reflated using the relevant CPI of the services provided (e.g., hair salons, drycleaners) to produce quarterly value indicators to benchmark to the annual CPV output and IC estimates to compile the quarterly CPV estimates. Coverage of informal sector hairdressers and massage providers working from home needs to be improved using Census, HIES and LFS data, as long as secondary jobs are identified.

44. Volume indicators based on the number of members (or population projections as the fallback option) can be used for religious and other membership organizations. For repairs of personal and household goods, the annual and quarterly estimates will need to be compiled using employment data. The number of deaths can be used as a volume indicator for funeral services; and population growth rates for hair and beauty salons, laundry and dry-cleaning, and other services. In the absence of turnover data, the services CPI can be used for religious and other membership organizations and other services; repairs of personal and household goods CPI for repairs of personal and household goods; CPI for haircuts and personal care for hair and beauty salons; and funeral services CPI for funerals. Composite IC price indices should be used to calculate independent CPV IC estimates.

ISIC T. Activities of Households as Employers

45. The annual CPV and KPV output and GVA estimates are based on the minimum wage and population growth. The number of households would be a better volume indicator but the staff indicated that this has not changed from 1.6 for several years. Nevertheless, the number of households should be used as the volume indicator to extrapolate the 2013 estimates to derive the quarterly KPV estimates. The KPV estimates can be reflated using the minimum wage to compile the quarterly CPV estimates. The annual estimates can then be obtained by summing the quarterly estimates.

Government Final Consumption Expenditure

2. The CPV estimates of government and Social Security Bank (SSB) output is used to produce the government final consumption expenditure (GFCE). The sale of government services are deducted from government sector output recorded in the production worksheets (e.g., public administration, public education, public health), and then the SSB and the Central Bank output are added. The output will also include financial intermediation services indirectly measured (FISIM). Any purchases of goods and services by government provided to households would also need to be added, such as the payment of health care and medical expenses on behalf of households. The KPV GVA estimates are to be derived separately for consumption of fixed capital (CFC) using a weighted composite CPI price index for transport, major appliances and ICT equipment; and compensation of employees (COE) using an employment volume indicator or a wage index as a deflator. The KPV estimates of intermediate consumption (IC) components should be compiled at a detailed expenses level using representative adjusted CPI price indices.

3. This will require modifying the compilation workbook to include the annual and quarterly CPV estimates of government output, IC, GVA (to include CFC) and GFCE by Classification of the Functions of Government and ISIC Revision 4 based on quarterly and annual government accounts data. The detailed expenses on other goods and services in the government accounts should be aggregated into 12–15 broad expenditure groups with the best proxy adjusted consumer price index (CPI), where 2013 = 100, is used to deflate the estimates to derive the KPV estimates. Although if timely, volume indicator data from utility companies on KHW electricity and cubic meter water sold to government can be used as well.

4. Prices indices that could be used include: CPI electricity, and CPI water and sewerage for the utilities expenses (if volume data not available); a goods CPI for supplies and materials; communications CPI for communications; CPI dwellings maintenance and repairs for building maintenance; CPI vehicle maintenance and repairs for vehicle maintenance; insurance CPI for insurance; land transport CPI for local travel; air transport CPI for international travel; education CPI for training; meals away from home CPI for hosting and entertainment; a services CPI for professional and other services; and the goods CPI for other expenses. The CPV and KPV estimates for GFCE would then be derived by deducting Government sales revenue from the government output estimates at the function/industry level, using the implicit price deflator for government output to deflate government sales to derive the KPV sales estimates.

Final Consumption Expenditure of NPISHs

5. The CPV estimates of FCE by NPISHs are compiled using the output estimates that are currently compiled using financial data for around 70 percent of NPISHs provided by the regulator responsible for NPISHs, grossed up using SSB earnings data. From the output estimates, any sales of goods and services produced by NPISHs are deducted to compile the FCE of NPISHs. The CBS needs to add any purchases of goods and services by NPISHs provided to households to the FCE. The KPV output estimates can be derived by deflating the CPV COE estimates using a wage index derived from the SSB and LFS data, and a composite price index can be used for IC to deflate the CPV estimates to derive the KPV estimates.

Household Final Consumption Expenditure

6. There are CPV estimates of household final consumption expenditure (HFCE) compiled by extrapolating forward from the benchmark 2013 estimates using various value indicators for 14 product groups that represent 78 percent of HFCE in 2013. The percentage change for these expenditures are then applied to the remainder to derive total HFCE.

7. It would be better to compile the HFCE at a more detailed product level, rather than at the high level currently compiled, using relevant value or volume indicators to extrapolate the base year estimates using the Classification of Individual Consumption According to Purpose (COICOP). The available data sources include the detailed monthly imports data and the various other value (e.g., data on sales to residents from utility companies) and volume (e.g., household formation, population by gender, electricity connections, student enrolments) to produce the annual estimates. The same approach could be used in developing the quarterly estimates, with the annual estimates then being compiled by summing the relevant quarters’ estimates.

8. The mission demonstrated an HFCE template that can be used to compile separate CPV and KPV estimates of own-produced, domestically produced purchases, and purchases of imported goods and services at the detailed COICOP level.

9. For consumption of own-produced goods, the CPV and KPV estimates can be compiled using the CPV and KPV output of relevant industries (e.g., agriculture, fishing) as value and volume indicators. The same approach can be used for imputed rents/owner-occupied dwellings.

10. For purchases of domestic produced goods and services, the KPV estimates can be compiled using the KPV output from the production side at the detailed industry level as volume indicators to extrapolate the base year estimates, and then reflate using the relevant CPI to derive the CPV estimates. That way the KPV estimates reflect the base period margins for goods and product taxes. As the CPI includes changes in margins and product taxes, reflation to derive the CPV estimates would reflect these changes.

11. Imports adjusted for re-exports, classified using the Standard International Trade Classification, or mapped from the Central Product Classification to COICOP can be used to derive the relevant imported consumer goods estimates that could be used as value indicators in the compilation of the CPV estimates for the imported component. The import values would need to be adjusted for import duties, excise and other product taxes and fees; and trade margins. The imports of services would be based on the equivalent balance of payments estimates, although the resident expenditure abroad survey data would be used to provide a further breakdown. The detailed product level adjusted CPI would then be used to deflate these estimates to derive the equivalent KPV estimates.

Gross Capital Formation

12. The gross fixed capital formation (GFCF) CPV estimates are derived using government expenditure and imports data for construction materials and machinery and equipment. The mission explained that the construction GFCF should be compiled using total construction output adjusted for IC repairs and maintenance; with the commodity flow approach used to estimate GFCF for transport, ICT equipment, and other machinery and other equipment. The GFCF estimates should be compiled using the commodity flow approach at a more detailed product level (i.e. properly adjusting for HFCE rather than using fixed ratios). The government GFCF component can then be deducted to provide separate estimates of non-government GFCF.

13. The GFCF should be compiled by adjusting for legal and real estate fees, and any other transfer of ownership costs, in addition to the current adjustment for relevant transfer taxes. The same methodology can be used to compile the annual and quarterly estimates. The coverage of own capital formation needs to be improved. A start can be made by developing estimates using the sum of costs approach for database and software development of the government. Improvements to the methodology for calculating construction output and deflating the CPV estimates are discussed in the construction industry section in Appendix V.

14. For machinery, transport and other equipment, the CPV estimates can be compiled by adding imports and domestic production of capital goods plus taxes and margins, less exports and HFCE, at a disaggregated product level. The KPV estimates can then be derived by deflating the detailed CPV commodity values using import unit value indices. As there are likely to be significant variations in the unit value indices, the unit values will need to be trimmed for outliers.

15. The estimates for biological assets, for example, breeding livestock and mango trees; intellectual property products; database development; artistic originals; and any scientific research and development will need to be compiled in the longer-term in the production worksheets and then used. The work-in-progress compilation methodology needs to be implemented to compile the estimates for biological assets, if significant.

16. The CFC estimates are being compiled using financial statements and government accounts data. However, the depreciation data from the financial statements and government accounts needs to be adjusted using a perpetual inventory model (PIM) to ensure replacement prices are used and the economic life of the asset is reflected (i.e., estimated useful life of dwellings, other buildings, other structures, transport, machinery and equipment and other durables). The financial statements data, along with data on net imports of various industry specific machinery and equipment and loans can be used to develop a detailed PIM to compile estimates of the stock of GFCF by activity and then apply CFC rates to derive the CFC estimates.

17. For inventories, changes in inventories can be derived from the financial statements data. The relevant output or IC price deflators or import price indices should be used for deflation.

18. The estimates for acquisition less disposals of valuables can be compiled using the commodity flow approach, using the Customs trade data. The HBS household expenditure, government accounts, trade and financial statements data can be used to develop the benchmark 2013 estimates. Quarterly net imports of precious metals and stones, antiques and collectibles (adjusted for international visitors’ purchases) can be used to extrapolate the base year estimate to derive the quarterly CPV estimates. The All Items CPI can be used to deflate the CPV estimates to derive the KPV estimates.

Exports and Imports of Goods and Services

19. The staff use the IMTS data for goods and the BOP data on services to compile the CPV estimates. The FISIM on exports and imports needs to be included in services credits and debits. There is a need to ensure the regular survey to collect expenditure data for resident expenditure abroad continues. The data from the survey should be supplemented by more detailed benchmark data collected via the HIES. The KPV estimates for goods can be compiled using unit value-based import price indices. As the travel credits are to be allocated across products in the HFCE compilation, the relevant product level CPI should be used for deflation purposes.

20. For imports of freight and insurance on freight services, cargo volumes of imports could be used as volume indicators to extrapolate the benchmark estimates to derive the KPV estimates. The CPI for the main destination countries or the advanced economies inflation index from the IMF’s World Economic Outlook database can be used to deflate travel debits. For other exports and imports of services, the equivalent implicit price deflator from the production worksheets can be used. There is a need to access the BOP income and services data by predominant country available from the CBA. This would help identify the main partner countries and weighted price indices that can be developed using the relevant price indices for those countries, as well as identifying the most relevant inter-bank lending rate to apply to FISIM imports.