Opening remarks

Opening remarks

On September 30^th2010 publishes CZSO a definitive set of the Annual National Accounts (ANA) for year 2007, a semi-definitive set of the ANA for year 2008 and limited preliminary set of the ANA for year 2009.

Remarks from June 2009:

Major changes in methods used to-date

The most significant changes in methods and definitions used to-date include (1) changes in classification of institutional sub-sector units, (2) utilization of company vehicles for private use, (3) capturing quasi-transitive trade, (4) modifications in classification and accrual of taxes and subsidies, (5) capturing alterations in rendition of social services, (6) estimate of non-residets’ labour performed in the Czech republic, (7) modifications in capturing production and intermediate consumption of the refinery industry, (8) change in valuation of unquoted shares, (9) modification in the estimate of cash on-hand in households, (10) lowering the level of other household receivables and liabilities.

Changes in classification of institutional sub-sector units. Approach to unit classification into institutional sectors has changed significantly due to a new interpretation of the impact of ownership (direct/top owner) and function (money market funds).

Direct/top owner. Up to now, methods of institutional unit classification into their respective sub-sectors have been based on the sub-sector classification of the direct owner. Since top owners commonly create complex structures, whereby they control numerous units through subsidiaries, existing methods ceased to work. Thus units are now classified according to the sector classification of the top enterprise owner. This way the fact who exercises control of a company or group of enterprises and sets policy is reflected more accurately. This change has the most significant impact in the non-financial sector. New data available from the statistical Business Register have been used for the classification.

Table 1: Sub-sector shares of the non-financial enterprise sector on gross value added before and after adoption of the new methodology of institutional sector unit classification, 2006

Method/Ownership type	public	private domestic	private foreign
By top owner	10,52%	50,16%	39,32%
By direct owner	11,94%	43,40%	44,66%

Money market funds were classified into the sub-sector of other financial intermediaries, except insurance corporations and pension funds up to now (S.123), together with their managers (investment companies) because no separate source data were available (only aggregate data used to be released from investment companies). However, money market funds as collective investors issue financial instruments of high liquidity which, as such, are close substitutes to money deposits. Thus they possess characteristics of broad money (aggregate M3 in the ESA95 methodology). Because of this, these funds have been moved, in compliance with ESA95 and data obtained, into the sub-sector of other monetary financial institutions (S 122), which represents a component of the money-creating subsectors.

Utilization of company vehicles for private use. So far utilization of company vehicles for private use has been considered to be a transportation service provided by an employer to its employee, while the value of the service is proportional to operation expenses of the vehicle. To synchronize the approach within the EU (see Directive 89/130) these company vehicle expenses are moved from the intermediate company consumption to employee final consumption expenditure. Regardless of which approach is chosen, GDP value is not affected since the company’s intermediate consumption is lowered by the same amount as the company output.

Capturing quasi-transitive trade. Foreign trade statistics are even able to track goods on the Czech territory, possessed wholly by a foreign entity, which is not cultivated by any way and which does not change ownership, while its valuation between import and export is changed significantly. It is not possible to balance this kind of a “transactions” on the National Account (in the supply and use tables), since everything transpires within the foreign company limits and the profit from the valuation difference goes to the foreign company as well. When the commodity 365 “Games and Toys” was affected to the extent requiring a solution, valuation difference was imputed into import of services as “trade service or margin”. Still open, another way of dealing with the phenomenon would be disregarding import and export statistics of goods.

Modifications in classification and accrual of taxes and subsidies, Classification of all taxes, fees and subsidies has been verified. It has been reassessed for subsidies aimed at suppression of uranium mining and for game machine fees. A considerable refinement has been achieved for computation of accrual excise duties on tobacco.

Subsidies for uranium mining suppression were classified as product subsidies, currently (starting with ANA 2006) included in “other subsidies on production”. Game machine fees were classified as taxes on products, currently (starting with ANA 2006) included in “other taxes on production”. Correction of both items will be performed during the out-of-order revision of the complete time series in June 2011.

Refinement of tax accrual. The Ministry of Finance of the Czech Republic specified a more accurate computation of the tobacco excise duty. Previous computation excluded the portion of tax related to supplies (like with VAT). However, valuation of supplies includes excise duty, thus it is necessary to capture usage in the period of time when tobacco products are produced, not consumed. The change is quite significant (see table 2), especially in this year, due to major stock-piling of tobacco products towards the end of 2007 (the reason being excise duty increase at the beginning of 2008).

Capturing alterations in rendition of social services. Legal conditions for providing help and support to people in a difficult social situation through social benefits were changed in 2006. In compliance with the new regulations social services are now provided on the basis of individual personal needs and are covered by direct financial contributions. Because of this, increase in relief social payments (D.624) has been recorded, along with production increase of social services provider units and increase of household final consumption expenditure.

Estimate of non-residets’ labour performed in the Czech Republic. Quantification of the migration effect on the national accounting has been under a long-term development. Within this framework new information on work permits, supplied by the Ministry of Labour and Social Affaires, allowed improved estimates of the number of foreigners living in the Czech Republic, sorted by the country of origin and the length of stay. In contrast to data known up-to-date a pronounced shift from non-resident (length of stay shorter than 1 year) toward resident foreigners has been observed, most notably with Slovaks.

Modifications in capturing output and intermediate consumption of the refinery industry. Adjustments of output and intermediate consumption in the oil refinery industry have been made following the modifications in the semi-definitive ANA 2006 set, whereby the levels of output and intermediate consumption were both decreased by about 20 billion Czech crowns. This adjustment has been already performed in the preliminary ANA 2007 version. Thus it was important to preserve methodology compatibility between 2006d and 2007s sets. The reasoning behind the adjustment is due to the fact that some refinery producers include excise duty into their operational expenditures (intermediate consumption) and sales (output). According to the national accounting rules, output is valued at basic prices, therefore it does not include taxes. Although intermediate consumption, which is valued at purchasers’ prices, includes taxes, these relate to consumed commodities and tax relations with the government. This modification has been forced by the way of tax accounting by respondents.

Change in valuation of unquoted shares. An agreement has been reached between the Czech National Bank and the Czech Statistical Office, as a part of harmonisation of their quarterly and annual statistics, regarding the valuation method of unquoted shares, ie. instruments, whose market prices are not available. The valuation method is based on Eurostat recommendation, utilizing the ratio of the shareholders’ and authorized capital of the corporation applied on the face value of shares to obtain an estimate of their market value as a reflection of cummulated profits in capital funds formation.

Modification in the estimate of cash on-hand in households. Residuum of cash on-hand estimate is newly allocated into the household sector. The value is obtained from source data collected for the other sectors.

Lowering the level of other household other accounts receivable and payable. Czech Statistical Office set to modify the level of assets and liabilities of households, e.g. including outstanding wages, interest, taxes, etc. The adjustment is based on analysis of households’ behavior, analysis of source data and a revision of previous methods.

Semi-definitive set of National Accounts for 2007

The semi-definite ANA version for 2007 is compiled from definitive results of annual statistical surveys and from various administrative data sources. Source data used for this version are different from those used for compilation of the preliminary version in September 2008, with the exception of most government institutions and partially financial institutions sectors.

Summary of the most significant changes between semi-definitive ANA version and the preliminary ANA version published so far is presented in table 2. The table shows the changes of both levels and trends of GDP resources and GDP-use aggregates.

Table 2 – Major changes of GDP formation and GDP use aggregates, 2007

	current prices		volume index		change ANAs-ANAp
Item	ANAp	ANAs	ANAp	ANAs	mil.CZK	volume p. p.
	mil.CZK		year 2006=100		mil.CZK	volume p. p.
Gross value added	3 181 800	3 178 011	105,8	105,9	-3 789	0,1
Net taxes on products	348 449	357 449	107,4	108,3	9 000	0,9
Gross domestic product	3 530 249	3 535 460	106,0	106,1	5 211	0,2
Final consumption expenditure	2 416 130	2 405 032	103,8	103,7	-11 098	-0,2
of which: Households	1 669 273	1 658 846	105,2	104,8	*-10 427*	*-0,4*
Government institutions	718 516	718 195	100,4	100,7	*-321*	0,3
NPISH	28 341	27 991	101,6	101,7	*-350*	0,1
Gross capital formation	936 485	954 628	108,4	109,4	18 143	0,9
of which: Gross fixed capital formation	857 726	890 251	106,7	110,8	32 525	4,1
Changes in inventories	75 625	60 930	133,2	91,1	*-14 695*	*-42,1*
External balance of goods and services	177 634	175 800	130,2	131,3	-1 834	1,1

Summary of the most significant changes of non-financial transactions as well as global aggregate changes between semi-definitive ANA version and the preliminary ANA version for 2007 is presented in table 3, showing the total change of the national economy as well as variations of the single institutional sectors, including their impact on major balancing items. Revision of income transactions has been affected most significantly by the new information on dividend payments abroad.

Table 3 – Major changes between the semi-definitive and the preliminary ANA set for 2007

		National economy total	Non-financial companies	Financial institutions	Government institutions	Households	NPISH	Non-residents
code	Name	S.1	S.11	S.12	S.13	S.14	S.15	S.2
P.1	Production	176 714	152 992	-3 508	-426	28 760	-1 104	x
P.2	Intermediate consumption	180 503	169 956	-6 547	-547	17 719	-78	x
B.1g	Gross domestic product	5 211	-16 964	3 039	121	11 041	-1 026	x
P.7	Imports of goods and services	X	x	x	x	x	x	1 834
P.6	Exports of goods and services	X	x	x	x	x	x	0
B.11	External balance of goods and services	X	x	x	x	x	x	1 834
Primary income, receivable		43 458	26 396	-7 550	8 986	15 672	-46	44 372
of	D.1 Compensation of employees	14 775	0	0	0	14 775	0	-14 522
which:	D.2 Taxes on production and imports	8 986	0	0	8 986	0	0	0
	D.4 Property income	19 697	24 611	-6 238	0	1 370	-46	58 894
Primary income, payable		77 433	82 585	-7 570	4	-7 350	764	10 397
of:	D.1 Compensation of employees	253	-2 485	1 549	4	386	799	0
which:	D.4 Property income	68 194	84 917	-9 064	0	-7 676	17	10 397
B.5g	Gross national income	-28 764	-73 153	3 059	9 103	34 063	-1 836	x
Secondary income, receivable		13 488	4 856	-323	4 689	2 130	2 136	2 195
of	D.5 Current taxes on income, wealth, etc.	4 689	0	0	4 689	0	0	0
which:	D.7 Other current transfers	8 867	4 890	-323	0	2 164	2 136	2 195
Secondary income, payable		15 722	9 700	-2 099	0	8 038	83	-39
of	D.5 Current taxes on income, wealth, etc.	5 894	5 797	-549	0	613	33	-1 193
which:	D.61 Social contributions	4 953	0	0	0	4 953	0	-4 987
	D.7 Other current transfers	4 921	3 937	-1 550	0	2 484	50	6 141
B.6g	Gross disposable income	-30 998	-77 997	4 835	13 792	28 155	217	x
P.3	Final consumption expenditure	-11 098	0	0	-321	-10 427	-350	x
B.8g	Gross saving	-19 900	-77 997	4 835	14 113	38 582	567	x
B.12	Current external balance	x	x	x	x	x	X	38 043
D.9	Capital transfers , receivable	10 383	8 379	11	-357	2 163	187	1
D.9	Capital transfers, payable	10 384	9 001	27	0	1 356	0	0
P.5	Gross capital formation	18 143	6 413	4 919	433	4 412	1 966	x
of	P.51 Gross fixed capital formation	32 525	19 543	5 465	411	5 116	1 990	x
which:	P.52 Changes in inventories	-14 695	-13 121	-547	22	-1 026	-23	x
K.2	Net acquisition of non-produced non-financial assets	759	400	511	0	-167	15	-759
B.9	Net lending(+)/net borrowing(-)	-38 803	-85 432	-611	13 323	35 144	-1 227	38 803

Definitive set of National Accounts for 2006

Definitive ANA version for year 2006 follows the semi-definitive version published in June 2008. The definitive version is compiled in the same extent as semi-definitive one and mostly uses the same data sources. However, adjustments have been made according to the methodological changes described above and some further changes due to new supplemental data as well as removing errors that occurred during processing of statistical surveys. These corrections were quite significant in the definitive version of the 2006 statistical survey of non-financial entities.

Summary of the most significant changes between definitive ANA version and the semi-definitive ANA version published so far is presented in table 4. The table shows the changes of both levels and trends of GDP resources and GDP use aggregates.

Table 4 – Major changes of GDP resources and GDP uses aggregates, 2006

	current prices		volume index		change ANAd-ANAs
Item	ANAs	ANAd	ANAs	ANAd	mil.CZK	Volume p. p.
	mil.CZK		year 2005=100		mil.CZK	Volume p. p.
Gross value added	2 900 333	2 907 660	106,8	107,1	7 327	0,3
Net taxes on products	315 309	314 709	102,8	103,9	-600	1,1
Gross domestic product	3 215 642	3 222 369	106,4	106,8	6 727	0,4
Final consumption expenditure	2 252 326	2 248 789	103,8	103,5	-3 537	-0,2
of which: Households	1 542 977	1 537 240	105,4	105,4	*-5 737*	*0,0*
Government institutions	684 684	686 984	100,0	99,3	2 300	*-0,7*
NPISH	24 665	24 565	111,2	110,7	*-100*	*-0,5*
Gross capital formation	852 151	863 242	111,0	110,5	11 091	-0,5
of which: Gross fixed capital formation	792 379	796 313	105,5	106,5	3 934	1,0
Changes in inventories	56 895	64 051	296,5	249,2	7 156	*-47,3*
External balance of goods and services	111 165	110 338	126,9	149,8	-827	23,0

Summary of the most significant non-financial transactions between the definitive ANA version and the semi-definite ANA version of 2006 is presented in table 5, showing the total change of the national economy as well as variations of the single institutional sectors.

Table 5 – Major changes between the definitive and the semi-definitive ANA set, 2006

code	name	National economy total	Non-financial corporations	Financial institutions	Government institutions	Households	NPISH	Non-residents
code	name	S.1	S.11	S.12	S.13	S.14	S.15	S.2
P.1	Output	743	2 463	-867	1	-754	-100	X
P.2	Intermediate consumption	-6 584	-4 805	84	0	-1 863	0	X
B.1g	Gross domestic product	6 727	7 268	-951	1	1 109	-100	X
P.7	Imports of goods and services	x	x	x	x	x	x	1 316
P.6	Exports of goods and services	x	x	x	x	x	x	489
B.11	External balance of goods and services	x	x	x	x	x	x	827
Primary income, receivable		7 725	-1 797	-1 475	1 000	9 997	0	-13 910
of:	D.1 Compensation of employees	13 249	0	0	0	13 249	0	-13 911
which:	D.4 Property income	-6 524	-1 797	-1 475	0	-3 252	0	1
Primary income, payable		-6 185	-2 852	-2 637	0	11	-107	0
of	D.1 Compensation of employees	-662	-592	-56	0	86	-100	0
which:	D.4 Property income	-6 523	-3 779	-2 575	0	-162	-7	0
B.5g	Gross national income	20 637	8 323	211	1 001	11 095	7	X
Current redistributive transactions, receivable		-1 764	1 444	183	0	-2 392	-999	-567
of	D.6 Social contributions	-2 298	3	0	0	-2 301	0	4
which:	D.7 Other current transfers	534	1 441	183	0	-91	-999	-571
Current redistributive transactions,payable		7 825	2 751	-657	-2 300	8 951	-920	-10 156
of	D.5 Taxes on income, wealth etc..	1 220	40	-40	0	1 220	0	-1 220
which:	D.6 Social contributions	2 482	3	0	-2 300	4 779	0	-4 776
	D.7 Other current transfers	4 123	2 708	-617	0	2 952	-920	-4 160
B.6g	Gross disposable income	11 048	7 016	1 051	3 301	-248	-72	X
P.3	Final consumption expenditure	-3 537	0	0	2 300	-5 737	-100	X
B.8g	Gross saving	14 585	7 016	1 051	1 001	5 489	28	X
B.12	Current external balance	x	x	x	x	x	x	-3 494
D.9	Capital transfers , receivable	-90	227	0	0	0	-317	0
D.9	Capital transfers, payable	-90	6	-1	0	-95	0	0
P.5	Gross capital formation	11 091	9 298	595	1	1 197	0	X
of	P.51 Gross fixed capital formation	3 934	3 123	246	0	565	0	x
which:	P.52 Changes in inventories	7 156	6 214	349	1	592	0	x
K.2	Net acquisition of non-produced non-financial assets	-1	-501	635	0	-137	2	1
B.9	Net lending(+)/net borrowing(-)	3 495	-1 560	-178	1 000	4 524	-291	-3 495

Data transferred from other sources, both statistical and administrative, are amended to conform conceptually to the National Account methodology. In some areas model calculations or expert estimates are performed. Detailed descriptions of all data sources, of their adaptation to the National Account methodology, further model calculations, adjustments aimed at capturing the state of economy as well as balancing adjustments are all published on the CZSO web page at http://apl.czso.cz/nufile/GNI_en_doc.zip (GNI inventory), in English only.

Regular revisions of national accounts (QNA → ANAp → ANAs→ ANAd) reflect both gradual data accuracy improvement of statistical and administrative data sources and new methodology problem solutions. These conceptual modifications are obviously excluded from physical volume data characteristics (they are included in implicit deflators). However, they are not included in the past data of time series.

Out-of-order revisions of national accounts are mostly focused on achieving methodical data compliance across the whole time series. The upcoming out-of-order revision will be published in June 2011. It will cover the period of 1995 to 2009. Apart from moving to the new NACE and CPA classifications, revision will contain a number of conceptual changes implemented during years 2009 to 2011 or modifications planned specifically for this revision. The most significant changes, affecting the size of GDP and GNI, will include (1) modification of imputed rental of owner-occupied dwellings compilation, (2) improving data accuracy regarding the housing privatization, (3) estimates of alcohol and tobacco smuggling and illegal production, (4) improving accuracy of FISIM estimate, (5) change in software capture (almost totally in gross fixed capital formation), (6) further accuracy improvement of estimates of remittances with foreigners, (7) modifications in classification and accrualisation of taxes and subsidies – subsidies for uranium mining suppression, game machine fees, highway and expressway usage fees, TV and radio fees, VAT and sales tax accrual methods, etc., (8) changes in imports and exports of services, (9) capturing of in kind social benefits payable by NPISH.