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The System of national and regional accounts changes - Esa 2010

Starting from September 2014, with the publication of a new release of national accounts, Member States of the European Union will adopt the new European system of national and regional accounts – Esa 2010 – will be adopted replacing Esa 95. The new system, defined in the EU Regulation no. 549/2913, which was published on 26 June 2013, is the result of a close cooperation between the Statistical Office of the European Commission (Eurostat) and the national accountants in the Member States.

The Esa 2010 sets principles and methods of national accounts at the European level. It establishes in a systematic and detailed way how to measure the variables that describe the functioning of economies, and is consistent with the worldwide guidelines on national accounting set out in the System of National Accounts 2008 (2008 Sna).

Esa2010 introduces several relevant differences in scope as well as in concepts from its predecessor Esa 95 (which has been applied since 1999). It actually reflects developments and advances in methodological research in measuring modern economies, which have been consolidated at the international level. It also meets the needs of users, in some cases improving the timeliness in the dissemination of results.

The changes in methodologies and sources introduced in the new national accounts have been divided into three macro categories:

Methodological changes related to the adoption of Esa 2010

Four main differences have an impact on macroeconomic aggregates:

• The recognition of research and development expenditure as capital formation. This change has had a positive impact on aggregate demand (and therefore on Gdp). Impact for the part of capital formation in R&D by market producer is equal to the amount of R&D costs. For the effect due to capitalization of R&D produced by a non-market producer value added increases by the amount of consumption of fixed capital of capitalized R&D;
• Weapon systems expenditure of the general government recognized as capital assets. The impact of this capitalization is limited. The intermediate consumption decreases because the government output, calculated as the sum of costs, decreases by the same amount as capital formation increases, leaving unchanged the value added. The value added and Gdp will increase by the amount of consumption of fixed capital;
• A change occurs in recording goods sent abroad or received from abroad for processing without change in ownership (processing activity). Goods sent abroad for processing are not included in the exports and imports figures but the value of the processing service is included. The new definitions does not affect external balance but it changes significantly the estimate of flows;
• The list of institutional units belonging to the General Government sector is revised to take into account methodological adjustments introduced by Esa 2010. This actually has an impact on public consumption expenditure and on general government deficit.

Changes on national accounts estimates shared at the European level other than those relating to Esa 2010

These changes are connected with the overcome of the formal reservations relating to consistent implementation of standard rules among European countries.

Currently three reservations specific to Italy and eight transversal reservations (applying to all countries) are in place. Most of them are connected with technical details having a minor impact on macroeconomic aggregates. One transversal reservation with a relevant impact concerns the inclusion of illegal activities in national accounts, in accordance with the principle of comprehensiveness. According to this principle, already established in Esa95, estimates have to include all the activities producing income, regardless of their legal status. At this stage, the illegal activities to be considered are three: narcotics, prostitution and smuggling (of alcohol and tobacco). The estimates methodologies for these activities is based on Eurostat guidelines.

Changes on national estimates methodologies and new information sources introduced in Italy

In the last two years, almost every aspect of the compilation of Italian national accounts has been verified and, when necessary, modified to implement methodological improvements and to incorporate new data sources. An improvement in robustness of the measurements as well as important revisions in many aggregates (level of Gdp, sectorial value added, employment, etc.) are the result of this process.

Many of these changes have been made possible given the availability of new sources, deriving from the integration of administrative and survey data (for example using the new data base for business structural statistics). The availability of new and richer information sources, that allow a massive use of individual data relating to firms and workers, has led to changes in the estimation procedures of two of the most important items in the National Accounts: labour input measures (quantity of labour employed in the economy in a specific period) and non-observed activities (specifically the part related to the sub declarations of economic activity by firms).