4.1 Growth of output About the data
Definitions
Data sources
About the data
Growth rates are calculated using constant price data in the local currency. Regional
and income group growth rates are calculated after converting local currencies to U.S.
dollars using the average official exchange rate reported by the International Monetary
Fund for the year shown or, occasionally, an alternative conversion factor determined by
the World Banks Development Data Group. The growth rates in the table are annual
average compound growth rates. Methods of computing growth rates and the alternative
conversion factor are described in Statistical methods.
Measuring growth
An economys growth is measured by the increase in value added produced by the
individuals and enterprises operating in that economy. Thus measuring real growth requires
estimates of GDP and its components valued in constant prices from one period to the next.
In principle, real value added can be estimated by measuring the quantity of goods
produced in a period, valuing them at an agreed set of base year prices, and subtracting
the cost of inputs, also in constant prices. This double deflation method, recommended by
the United Nations (UN) System of National Accounts, requires detailed information on the
structure of prices of inputs and outputs. In some sectors, however, value added is
extrapolated from the base year using volume indexes of inputs and outputs. In other
sectors, particularly services, real output is imputed from labor inputs, such as real
wages or the number of employees. The real output of governments and other unpriced
services are calculated in the same way. In the absence of well-defined measures of
output, measuring the real growth of services remains problematic.
Technical progress can lead to improvements in production and the quality of goods. If
not properly accounted for, either effect can distort measures of value added and thus of
growth. When inputs are used to estimate output, as in services, unmeasured technical
progress leads to underestimates of the quantity and real value of output. Unmeasured
changes in the quality of goods produced also lead to underestimates of real value. The
result can be underestimates of real growth and productivity change and overestimates of
inflation.
Nonmarket services pose a particular problem, especially in developing countries, where
much economic activity may go unrecorded. Obtaining a complete picture of the economy
requires estimating household outputs produced for local sale and for home use, barter
exchanges, and illicit or deliberately unreported activity. How consistent and complete
such estimates will be depends on the skill of the compiling statisticians and the
resources available to them.
Rebasing national accounts
Countries occasionally rebase their national accounts by collecting a complete set of
observations on the value and volume of production in a new base year. Using these data,
they update price indexes to reflect the relative importance of inputs and outputs in
total output, and generate volume indexes to reflect relative price levels. The new base
year should represent normal operation of the economythat is, a year without major
shocks or distortions. But the choice of base year and the timing of economic surveys are
also determined by administrative convenience, resource availability, and international
agreement. Some developing countries have not rebased their national accounts for many
years. Using an old base year can be misleading because implicit price and volume weights
become progressively less relevant and useful.
The World Bank collects constant price national accounts series in national currencies
and the countrys original base year. To obtain comparable series of constant price
data, GDP and its main sectoral components by industrial origin (agriculture, industry,
and services) are rescaled to a common reference year, currently 1987. This process gives
rise to a discrepancy between the rescaled GDP and the sum of the rescaled components.
This discrepancy is allocated to the estimate of services value added on the output side
and to private consumption expenditure on the expenditure side.
Changes in the System of National Accounts
Most countries use the definitions of the UN System of National Accounts (SNA), series
F, no. 2, version 3, referred to as the 1968 SNA. Version 4 of the SNA was completed in
1993. Until new economic surveys can be implemented, most countries will continue to
follow the 1968 SNA. A few low-income countries still use concepts from older SNA
guidelines, including valuations such as factor cost and market prices, in describing
major economic aggregates.
Definitions
Gross domestic product at purchasers prices is the sum of the
gross value added by all resident and nonresident producers in the economy plus any taxes
and minus any subsidies not included in the value of the products. It is calculated
without making deductions for depreciation of fabricated assets or for depletion and
degradation of natural resources. Value added is the net output of a sector after adding
up all outputs and subtracting intermediate inputs. The industrial origin of value added
is determined by the International Standard Industrial Classification (ISIC), rev. 2.
Agriculture corresponds to ISIC divisions 15 and includes
forestry and fishing. Industry comprises value added in mining,
manufacturing (also reported as a separate subgroup), construction, electricity, water,
and gas. Manufacturing refers to industries belonging to divisions
1537. Services correspond to ISIC divisions 5099.
Data sources
National accounts data for developing countries are collected from national statistical
organizations and central banks by visiting and resident World Bank missions. Data for
industrial countries come from OECD data files. The
World Bank rescales constant price data to a common reference year. The complete national
accounts time series is available on the World Development Indicators CD-ROM. For
information on the OECD national accounts series see OECD, National Accounts,
19601995, volumes 1 and 2.
THE WORLD BANK METHODOLOGY:
----- On External Debt
Definitions
Debt
indicators
----- On WORLD DEVELOPMENT INDICATORS
Size of the economy
Quality of life
Development progress
Trends in long-term development
Long-term structural change
Key indicators for other economies
Population
Land use and deforestation
Growth of output
Credit, investment and expenditures
Integration with the global economy
Back
to Research Methods |