Real economic growth


Source

HERMREG database: collaborative project between the Federal Planning Bureau, Statistics Flanders, the Institut Wallon de l'Evaluation, de la Prospective et de la Statistique (IWEPS) and the Brussels Institute for Statistics and Analysis (BISA), Statbel, Institute of National Accounts (INA), processed by Statistics Flanders (for the Belgian data)

European Commission

Definitions
 

Gross domestic product (GDP): the monetary value of the final goods and services produced in a given country or region over one year’s time. These are consumer goods and capital goods (investments) from the private and public sectors for domestic use and export, and after deduction of the imported consumer and capital goods.

Terminology of the European System of Accounts (ESA) 2010:

(1) Production sold (at the price without transport costs if invoiced separately and including any possible transport margin).
(2) Intermediate consumption at purchase prices (without deductible VAT, including any non-deductible VAT).
(3) = (1) - (2) Gross value added at factor cost.
(4) Non product-linked taxes (taxes on land use, buildings, environmental taxes, etc.).
(5) Non product-linked subsidies (for labour, environmental protection, etc.).
(6) = (3) + (4) - (5) Gross value added at basic prices.
(7) Product-linked taxes (VAT, import duties and taxes, excise duties).
(8) Product-linked subsidies (import subsidies, other subsidies).
(9) = (6) + (7) - (8) Gross domestic product at market prices.

The real increase in GDP is based on the series in chained euros.
Price changes are thus excluded from growth, volume changes remain. For the calculation of the growth between t and t+1, the prices of t are used for both years.

The National Bank of Belgium puts it this way: when applying chained indices, the volume growth between two consecutive periods, t and t+1, is calculated by using the prices of the year t. For example, the volume growth of investments in volume between years 1 and 2 are calculated by comparing the investments of year 2 expressed in prices of year 1 with the investments in year 1. The growth between years 2 and 3 is calculated by comparing the investments in year 3 expressed in prices of year 2 with the investments in year 2, etc. The changes between consecutive periods are ‘linked’ (cumulated) in order to obtain a chained index. When the chained index is ultimately applied to the values of an aggregate of a chosen ‘reference year’, a volume series is obtained in ‘chained euros’. The reference year is generally changed annually, but some countries only do this every five years. The choice of the reference year has no impact on the growth pattern of the series.

The introduction of chained indices improves the accuracy of the measurement of economic growth and improves the international comparability. Accurate volume measurement in the national accounts is important for defining growth of GDP and its components, as an input for various economic studies which investigate the structure and the evolution of the economy in real terms, and as an input for productivity measurements.

Remarks on quality
 

Gross domestic product for Belgium and the regions is compiled by the Institute of National Accounts based on a wide range of sources. For companies, the national accounts and the VAT and NSSO (National Social Security Office) data are important sources. For public bodies, public accounts are used. The calculations are made in compliance with the ESA 2010 methodology and are internationally accepted by the national statistical institutes. These data are submitted to Eurostat.

The output of the Institute of National Accounts forms the source of the medium-term projections in the HERMREG model. These are calculated using econometric estimates by the Federal Planning Bureau in collaboration with statistical experts from the regions. The figures for the regions are converted into euro purchasing power standard (PPS) by Statistics Flanders. The HERMREG output is always submitted to a Steering Committee in which the Federal Planning Bureau and the regions are represented.

References

FPB, SV, IWEPS, BISA: Regional economic outlook

Institute of National Accounts: Regional accounts

European Commission: Summer Forecast 2021

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