Written Answers. - GNP Statistics.
Ruairí Quinn
Ceist:
97
Mr. Quinn
asked the
Minister for Finance
if he will provide details of GNP for each of the past ten years; the estimate made by his Department and bodies under the aegis of his Department of GNP for 1999; the forecast made by his Department or by these bodies of GNP for each of the years from 2000 to 2002; the revisions, if any, to be made to the mode of calculation of GNP which have been made over the past ten years, which are being introduced or which are in prospect; if the GNP figure for any of the past ten years would be significantly different if calculated in accordance with current or planned modes of calculation; if so, the amounts of this difference; and if he will make a statement on the matter.
[20105/99]
The latest GNP estimates for Ireland were published on 30 June by the Central Statistics Office, CSO, as part of the 1998 national income and expenditure accounts. These estimates are set out as follows:
Table 1: Gross National Product at market prices 1990-1998 (£ millions)
|
Year
|
1989
|
1990
|
1991
|
1992
|
1993
|
1994
|
1995
|
1996
|
1997
|
1998
|
|
£ million
|
22,185
|
25,591
|
26,775
|
28,181
|
30,370
|
32,885
|
36,503
|
40,146
|
45,500
|
52,183
|
The details for the period 1990-98 are produced on the new ESA95 basis which was introduced this year. This new basis for estimating national income is explained below. The estimate for 1989 is calculated on the old ESA79 basis.
The current forecast for GNP for 1999, which was published in the economic review and outlook in July, is £57,600 million. This is based on a nominal increase in GNP of 10.4 per cent in 1999 over 1998.
Published forecasts of GNP by the Department of Finance for the period 2000-02, taking account of the revised estimates published in June, are not available. However, the latest unpublished departmental assessment forecasts that the level of GNP will be £62,250 million in the year 2000, £67,200 million in 2001 and £72,125 million in 2002. These levels are based on nominal GNP growth rates of approximately 8 per cent per annum in 2000 and 2001 and 7.5 per cent in 2002. These forecasts are now being reviewed in the context of the 2000 budget. Revised forecasts will be published on budget day.
The Central Bank in its autumn 1999Quarterly Bulletin has forecast the value of GNP for 1999 at 73,923 (£58,219). It has not published forecasts for subsequent years. The ESRI in its autumn Commentary forecast GNP in 1999 at £57,658, rising to £62,906 in 2000.
In estimating GNP the CSO use the accounting rules of the European system of accounts, ESA. The ESA is a more specific and detailed European Union version of the United Nations sponsored system of national accounts, SNA.
The accounting rules presently used by CSO are those of the European system of regional and national accounts 1995, ESA95. This system is a recent update of an earlier system which dated from the year 1979, ESA79. The new methodology was established by EU Council Regulation No. 2223/96. The regulation obliged all member states to use the new accounting rules to compile their national accounts from 1999 onwards, apart from one exception concerning the measurement of the output of banks.
In 1996 the CSO introduced two of the more significant proposed ESA95 changes relating to the recording of transactions of foreign owned enterprises. These changes related to retained earnings and royalty payments.
Under previous rules the profits of multinationals were recorded as a factor outflow when the profits were actually remitted to the foreign owner. Accordingly, profits earned and retained by multinationals remained part of Irish GNP. This was changed to an accruals basis under ESA95 and as a result all profits of multinationals are now recorded as factor income outflows and are excluded from GNP as they are earned.
Royalty payments made by Irish subsidiaries to their owners in return for the right to use technology developed abroad were previously included in factor income outflows as profit distributions. They are now treated as the purchase of services provided by the owners of the technology. This has the effect of reducing the operating surplus of these operations and, therefore reduces the value of GDP. However, both the value of GNP and the current account surplus in the balance of payments are unaffected.
These two changes were introduced as early as possible because of their significance in an Irish context. The remaining ESA95 changes were introduced in the GNP estimates published in June of this year. These new GNP estimates are presented in the following table. The table also gives the values of GNP for these years in accordance with the former ESA79 methodology. As the tables indicates, the effect of the introduction of the new accounting rules on GNP levels is not significant.
Table 2: Gross National Product at market prices 1990-1998 (£ millions)
|
£ million
|
1990
|
1991
|
1992
|
1993
|
1994
|
1995
|
1996
|
1997
|
1998
|
|
ESA95
|
25,591
|
26,775
|
28,181
|
30,370
|
32,885
|
36,503
|
40,146
|
45,500
|
52,183
|
|
ESA79
|
25,476
|
26,943
|
28,521
|
30,539
|
32,806
|
36,850
|
40,548
|
45,634
|
52,653
|
Apart from the changes to the basic ESA accounting rules described above, over the past number of years Ireland and other EU member states have been engaged in a work programme to improve the consistency and comprehensiveness of their GNP estimates. This is in compliance with GNP directive 89/130.
New data sources and improved estimation methods have resulted in a number of revisions to the GNP estimates. The most significant of these was introduced last year when the CSO completed an EU work programme designed to improve the exhaustiveness of GNP estimates. Details of the work undertaken and the resulting revisions were described in a special information notice issued by the CSO in November 1998. The overall impact of these changes was to increase GNP levels by almost 3.5 per cent, although year-on-year growth rates were relatively unaffected. These revisions are fully incorporated in the ESA 79 and ESA 95 GNP estimates provided in the previous table 2.
As mentioned earlier, one element of the new ESA95 accounting rules has not yet been implemented. This relates to the methodology used to estimate the output of banks and other financial intermediation services, FISIM. Implementation of this change was deferred by the EU Council and member states have instead been asked to undertake a series of trial calculations to try to assess the impact of this new accounting rule. These assessments are ongoing. The new methodology will not be introduced until 2002 at the earliest and only after the agreement of the EU council. The CSO are not, at this stage, in a position to estimate the impact of this change on GNP levels.
Further revisions of the ESA95 accounting rules are also likely in the period ahead. Previously the accounting rules were only changed periodically so that they gradually became outdated. There is now an emphasis on regular updating of the national accounting methodology. In this regard, two proposed changes to the ESA95 have already been discussed and will be presented to the EU Council for decision later this year. These concern the recording of interest rate and foreign currency swap transactions and the measurement of accrued taxes and social contributions. At this stage it is unclear whether these changes will be adopted. However, the impact on Irish GNP levels should not be significant.
The CSO is also continuing its programme of improving the reliability of the GNP estimates, in the context of GNP Directive 89/130. This will result in further revisions to the GNP estimates. In particular, the CSO is at present finalising a project to ensure that the activities of the International Financial Services Centre, IFSC, are comprehensively captured in the GNP estimates. These revisions will be incorporated in the national income estimates to be published next year. The latest indications from the CSO suggest that those revisions relating to the IFSC are likely to lead to some increase in the level of GNP for 1998.
In summary, therefore, a number of revisions have been made to Irish GNP estimates over the past few years. The most important of these were due to the introduction of the new ESA95 accounting rules and the completion of an EU work programme to improve the exhaustiveness of member states' GNP data. The figures published by CSO in June incorporated these adjustments. While the availability of new data or new data sources or the introduction of improved methodologies will inevitably result in revisions to GNP levels from time to time, no significant changes, apart from those mentioned above, are in prospect at present.
