Gross Domestic Product in Latvia, total (ESA 2010)
Gross Domestic Product (GDP) is one of the indicators in the System of National Accounts.
The System of National Accounts is a set of harmonised and conformable macroeconomic indicators, providing an overall picture of the economic situation and is widely used for economic analysis, forecasting and elaboration of the state policy.
Updated quarterly time-series of GDP indicators have been published.
The updated time-series include all annual data revisions (additional information regarding GDP revisions in 2019). Along with these revisions, basing on OECD recommendations for improving the quality of quarterly GDP time-series, disaggregation of annual data by quarters method was changed. Previously, simple mathematical disaggregation method “pro–rata” was used, which divided changes of annual data level proportionally by quarters, thus keeping quarterly increase rates within annual framework, but creating the so-called “step effect” among years. Basing on the data disaggregation quality criteria put forward, as well as on "European Statistical System (ESS) guidelines on temporal disaggregation, benchmarking and reconciliation — 2018 edition", elaborated by the EU Statistics Bureau Eurostat in cooperation with statistical institutions of the member states, the CSB took a decision to change benchmarking method of the annual data by implementing optimal disaggregation of the time-series. After testing several methods, in compliance with quality criteria put forward, “Denton – Cholete” method was chosen.
The direct benchmarking is applied for components at the most detailed level necessary to produce. All aggregates are benchmarked indirectly by the aggregation of the benchmarked components. Indirect benchmarking of aggregates allows to preserve the consistency (additivity) between components and all aggregates. The Denton-Cholette method has been implemented using the R package tempdisagg “Methods for Temporal Disaggregation and Interpolation of Time Series” developed by Christoph Sax, Peter Steiner, and Tommaso Di Fonzo (https://cran.r-project.org/package=tempdisagg).
Simultaneously, change of reference year from 2010 to 2015 took place.
- Table of contents
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Concepts and definitions
- Data collection and statistical processing
Concepts and definitions
Gross domestic product (GDP)
Gross domestic product (GDP) represents the total amount of end products and services produced in the territory of a country within a year. GDP is calculated on the basis of data on domestic production (at current and constant prices), expenditure (at current and constant prices) and income (only at current prices).
GDP from the production approach is calculated as the sum of all value added of all activities producing goods or providing services plus taxes less subsidies on products.
GDP from the expenditure approach consists of all final expenditure made in either consuming the final output of the economy or in adding to wealth plus exports less s imports of goods and services.
GDP from the income approach is calculated as the sum of income earned via production of all goods and services plus taxes on production and imports less subsidies.
GDP revisions in 2019:
Output
Gross national income
Gross National Income characterises income from economic activities of residents.
Gross National Income equals GDP plus property income, compensation of employees and subsidies receivable from other countries minus property income, compensation of employees and taxes from production and import payable to other countries.
System of National Accounts
Value added [GDP]
Value added is increase of product’s market value, which arises in the result of any kind of economic activity. It is calculated by deducting intermediate consumption from output (at basic prices). The balancing item of the production account is value added.
Taxes of products
Subsidies on products
Subsidies on products are subsidies which are paid for one unit of goods or services produced or imported.
Subsidies on products are usually paid when the good is produced, sold or imported. Subsidies on products are related only to the market output or output for own final consumption.
Intermediate consumption
Intermediate consumption covers goods and services consumed ad input during the production process, except for the fixed assets the consumption of which is entered as consumption of fixed capital. In the production process, goods and services can be either transformed or used.
Data collection and statistical processing
Survey Method and Source Data
Calculations are made in line with the methodology of the European System of Accounts (ESA 2010). Main data sources used in calculations are:
- Surveys of enterprises and institutions;
- Labour Force Survey;
- Data from the Budget, the Treasury, the State Revenue Service, the Bank of Latvia and the Financial and Market Commission;
- Household Budget Survey.
The calculations include also estimates for non-response, non-registered units, under-reporting to fiscal administration, income in kind, products produced for own consumption as well as income from illegal activities (e.g., sale of drugs).
Calculation Method
GDP indicators are calculated in line with the European System of Accounts (ESA 2010) in breakdown by institutional sector. GDP estimate can be obtained in three ways: from production side (GDP from production approach), from demand (expenditure) side (GDP from the expenditure approach) and from income side (GDP from income approach).
The GDP statistics from production and expenditure approach is calculated at current prices (registration and calculations are made at the actual prices of the respective period) and constant prices. The indicators at constant prices are expressed at prices of the previous calendar year and prices of the reference year (chain-linked).
To calculate GDP at the prices of the previous calendar year the actual prices of the previous calendar year are used as a base and the “annual average” method (where each running quarter (or year) is calculated at the average prices of the previous year) is used. To make the calculations, various deflators are used. Both volume indices and price indices may be used as deflators. The following price indices are used: consumer price index, producer price index, construction cost index, services producer price index, price indices of agricultural products, export unit value index, import unit value index. The following volume indices are used: change in number of employees and change in natural indicators (e.g., in removals, passenger number, freights, etc.).
To calculate GDP at the prices of the reference (base) year (currently, prices of 2010) the indices calculated from the GDP indicators at the prices of the previous year are used to chain-link the calculated volume indices with 2010.
Gross domestic product from the production approach is calculated as a sum of value added plus taxes on products minus subsidies on products.
Value added is calculated by subtracting intermediate consumption from the value of output of goods and services. Output refers to the total products created during the reference year. Intermediate consumption consists of the value of goods and services used during the production. Breakdown of the data by years provides information on value added at current prices at 2-digit level of NACE Rev. 2 classification.
Taxes on products added to the total value added cover the taxes paid at the sale of product, e.g., value added tax, customs and excise duties.
Gross domestic product from the expenditure side at current and constant prices is calculated by summing final consumption expenditure, gross capital formation, exports of goods and services and minus imports of goods and services.
Gross domestic product from the income approach is calculated at current prices only. When calculating GDP from the income approach, the data on the primary income of the economic activity: compensation of employees (wages and salaries in cash and kind and social contributions of employers), taxes on production and imports, subsidies, gross operating surplus and gross mixed income (including consumption of fixed capital).
Gross national income is calculated by summing gross domestic product with property income, compensation of employees and subsidies received from other countries and by subtracting property income, compensation of employees and taxes on production and imports paid to other countries.
Seasonally and calendar adjusted GDP indices are available in quarterly breakdown. Users must take into account the fact that upon adding data of a new period also the previous timeseries are recalculated. (Gross Domestic Product in Latvia, seasonally adjusted – methodology)
Prices of previous year and reference year
- GDP from production and expenditure approach is calculated also at constant prices: prices of the previous year and prices of the reference year. Calculation at prices of the previous year is based on the "annual average method" where the running quarter is calculated at the average prices of the previous year;
- To calculate GDP changes over a longer period it is “chain-linked” in one dynamic series with one reference year. Currently the year 2010 is used.
Data adjustment
In line with the Guidelines for CSB Revision Policy, the published data are adjusted after the balancing of quarterly or annual national accounts.
Classification
The data are calculated in line with the following classifications:
- Statistical Classification of the Economic Activities in the European Communities (NACE Rev. 2);
- Classification of Institutional Sectors (ES);
- European Classification of Individual Consumption according to Purpose (ECOICOP);
- Classification of the functions of government (COFOG);
- Classification of Products by Activity (CPA version 2.1);
- Classification of Administrative Territories and Territorial Units of the Republic of Latvia (CATTU);
- Nomenclature of Territorial Units for Statistics (NUTS 2016);
- Classification of transactions and other flows.
Contact persons on methodology
Inese Medne
Annual National Accounts Section
Deputy Section Head