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CHAPTER X - NATIONAL ACCOUNTS
INTRODUCTION

As the National Statistical Organization of Sri Lanka, the Department of Census and Statistics (DCS) is responsible for preparing and disseminating of National Accounts aggregates including the Gross Domestic Product (GDP). These estimates are prepared according to the System of National Accounts (SNA 2008) which is an internationally accepted latest set of recommendations for compiling National Accounts Estimates (NAE).

The NAEs are essential for the formulation of policies and plans to achieve the macroeconomic objectives of a country such as economic growth and development, poverty alleviation etc. And also, it should reflect the most accurate structure and size of the economy of a country. To achieve these goals, the DCS updates the base year of NAEs once in every five years. Accordingly, the base year of NAEs was updated from 2010 to 2015 in the year 2022.

The updating of base year of GDP improves the coverage of GDP and the accuracy of GDP at constant prices.
 
ESTIMATION OF GROSS DOMESTIC PRODUCT (GDP)

The GDP is the monetary value of the goods and services produced by resident producers in the economic territory of the country within a specific period of time. It measures the size of the economy. And also, some important macroeconomic indicators such as budget deficit, government revenue, and government debt are expressed as a percentage of GDP.

The GDP is estimated under three approaches namely Production, expenditure and income. The statistics derived from these estimates are very useful in policy formation and evidence-based decision making of the country.

 

Production approach

The Gross Domestic Product at market prices is
estimated under the production approach by calculating the total Gross Value Added (GVA) generated by resident producers who are engaging in production activities within the production boundary of the country. The taxes on goods and services should be added to the total GVA while subsidies should be deducted from it. Currently, the DCS disseminates the GDP by production approach following three disseminating formats of A49 (49 production activities), A18 (18 production activities) and A10 (10 production activities)
 
Expenditure approach

The GDP under the Expenditure approach can be measured by adding up final expenditures incurred by the different institutional sectors in order to purchase goods and services produced by resident producers within a country’s economic territory over a specific period of time. The GDP under expenditure approach is comprised with the ‘Private Final Consumption Expenditure (PFCE)’ incurred by Households (HH) and Non-Profit Institutions Serving Households (NPISH), ‘Government Final Consumption Expenditure (GFCE)’ incurred by General Government (GG), ‘Gross Capital Formation (GCF)’ incurred by all institutional sectors and ‘Net Exports (NX)’ of rest of the world sector.
 
Income approach

When estimating GDP under Income Approach, it shows the way of generation of income through the income components. The GVA is the summation of these income components which is basically computed for each economic activity under the production approach, are expressed as income components under this approach. The GVA comprises the components of Compensation of Employees (COE), Gross Operating Surplus (GOS), Mixed Income (MI) and net value of the other taxes on production. The GDP under the income approach is obtained by adding net taxes on products to the GVA.

The addition of net factor income of rest of the world to the Gross Domestic Income (GDI) gives the Gross National Income (GNI) of the country.