Press release 31.3.2006

Methodological and time series reform of national accounts causes level corrections to time series

The calculation methods of national accounts and the time series data of annual national accounts for the years 1975-2004 have been changed. In particular, changes have occurred in the calculation methods of the volume development of gross domestic product and its sub-components. At the same time, other revisions were made to time series. The changes are mainly due to the harmonisation work of national accounts carried out in the EU. Because of the changes the national accounts data for 2005 released earlier on 1 March 2006 are not in all respects comparable with the data published now.

Finland's gross domestic product derived with the new calculation method is slightly higher than that reported earlier and its volume development also differs somewhat from that calculated with the previous method. The level of gross domestic product rose particularly in 1999 to 2004 and in 1975 to 1993. The revised new gross domestic product is in these years 1.0 to 2.5 per cent higher than that calculated with the previous method.

On account of the revised calculation method the quantitative annual change of gross domestic product became revised by under one percentage point in other years but in 2001. Then the volume of gross domestic product grew by 2.6 per cent according to the new method compared with the previous year, while growth was earlier estimated at one per cent. The change was due to the upward revision of exports data of services.

Changes in volume calculations

The so-called changing base year was taken into use in national accounts. In the new method the base year changes continuously so that constant price figures are calculated using prices for the preceding year, for example, the now published data for 2004 at 2003 prices. With this method structural changes in the economy are taken into account better than with the previous, fixed base year method.

The figures according to the changing base year are converted by chaining annual changes into prices of the selected reference year. In the series published now the reference year is 2000. When interpreting constant-price data it should be noted that the absolute figures of the chained series cannot be added together. For example, the industry-specific value added of the reference year is not added up as value added for the whole economy or the sub-components of gross domestic product are not added as gross domestic product.

The second methodological change in constant-price data is the introduction of double deflation: constant-price output and intermediate consumption are calculated by product with the accuracy of around 950 product groups and value added at constant prices is obtained as the difference of output and intermediate consumption. Because of the change, the data calculated with the previous and new methods about the volume development of GDP and its sub-components differ from each other. The changes may be large especially on the industry level. The double deflation method will be applied starting from the year 2001.

Because current-price figures were also reviewed in this reform, the reviews to current-price values are also reflected in volume changes, which thus differ from the previous calculations.

The third change in the volume methodology concerns the calculation of general government health, education and social services and compulsory social insurance, in which performance indicators were taken into use. The new method is applied starting from 2001. With this method it is possible to measure the development of productivity in these public service industries. The previous method was based on cost deflation and the assumption that productivity remains constant.

Other changes

In connection with the revision a group of other methodological changes and reviews were made, which have had an effect on the levels of gross domestic product and its sub-components and other national accounts data. For example, a level revision was made to exports of services starting from 1999, which raises the level of final consumption and at the same time, that of gross domestic product, and adds the income from current external balance. The level revision is based on Statistics Finland's extended data collection powers, which improved the possibility to compare the source data of different statistics. As a result of the comparison, the interpretation of the exports of services concept could be specified: items have been added to exports of business services that previously had to be assigned to enterprises' intermediate consumption when balancing the national supply and demand of national accounts.

The revisions made to exports of services increased exports from 1999 to 2004 yearly by around EUR 2 to 4 billion. The level of total exports (goods and services total) rose in those years because of the revision by 3 to 7.5 per cent.

The time series of the statistics on taxes and tax-like payments and those of general government EMU deficit and gross debt will also change as a result of the revision. Data from Statistics Finland's foreign trade in services will be released from 2000 onwards.

Comparability of the data with those published previously

Due to the methodological revision, special attention should be given to the comparability of the data when using the statistics. The national accounts data for 2005 released previously on 1 March 2006 are not in all parts comparable with the figures published now. The data released now are calculated with the new method from 1975 until 2004. The new annual accounts time series 1975 to 2004 replace the time series published earlier.

In quarterly national accounts the new volume calculation method and revised levels will be introduced to the data concerning the first quarter of 2006, which will be released on 9 June 2006. Then the data for the year 2005 will also be produced in accordance with the new method. Quarterly time series 1975 to 2004 will be available from Statistics Finland at the beginning of April.

Data for 2005 concerning sector accounts according to the new levels will be published on 13 July 2006.

Inquiries:
Annual national accounts: Mr Olli Savela +358 9 1734 3316 and Ms Eeva Hamunen +358 9 1734 3385
Taxes and tax-like payments: Mr Mika Sainio +358 9 1734 2686
General government EMU deficit and gross debt: Mr Elli Paakkolanvaara +358 9 1734 2262
Statistics on foreign trade in services: Mr Rami Peltola +358 9 1734 3615

Director in charge: Mr Ari Tyrkkö

Links:
Methodological description: http://tilastokeskus.fi/til/vtp/men. _en.html

Statistical releases related to the press release:
Taxes and tax-like payments 2004
General government deficit and gross debt according to EMU criteria 2004