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REBASING NATIONAL ACCOUNTS ESTIMATES Background of Rebasing and Comparison of key Macro- Economic indicators in old and new series Department of Census & Statistics Ministry of Policy Panning, Economic Affairs, Child, Youth and Cultural Affairs 1 Table of Content Comparison of key Macro- Economic indicators completed under old and new series base years ............ 4 Executive Summery .................................................................................................................................. 4 Background ............................................................................................................................................... 4 What is Gross Domestic Product (GDP) and economic growth rate? ...................................................... 4 How is the GDP computed? ...................................................................................................................... 4 Production approach ............................................................................................................................ 4 Expenditure approach .......................................................................................................................... 4 Income approach .................................................................................................................................. 5 Why the base year is needed?.................................................................................................................. 5 Why does GDP need to be rebased? ........................................................................................................ 5 What are the benefits of rebasing GDP .................................................................................................... 5 What are the implications of GDP rebasing ............................................................................................. 6 Why is year of 2010 used as the new base year? ..................................................................................... 6 Methodology of the exercise .................................................................................................................... 6 Data sources ............................................................................................................................................. 7 Main steps of rebasing process ................................................................................................................ 8 Statistics released under the new series .................................................................................................. 8 Revision Policy .......................................................................................................................................... 8 Documents available on rebasing............................................................................................................. 9 Stakeholder involvement in providing source data.................................................................................. 9 External validation of rebased estimates ................................................................................................. 9 The way forward ....................................................................................................................................... 9 Economic activities in the two series ....................................................................................................... 9 Agricultural activities ................................................................................................................................ 9 Industrial activities.................................................................................................................................. 10 Services activities .................................................................................................................................... 10 Comparison of first quarter 2015 estimates in the two series ................................................................... 12 Changes in the level of GDP.................................................................................................................... 12 Effect of Revised Series in the growth rates of GDP............................................................................... 12 Structure of Sri Lankan economy ........................................................................................................... 12 Contribution to the GDP growth rate ..................................................................................................... 13 GDP Implicit Price Deflator ..................................................................................................................... 14 Comparison of Annual estimates in the two series .................................................................................... 14 Changes in the level of GDP.................................................................................................................... 14 Effect of Revised Series in the annual growth rates of GDP ................................................................... 15 Structural composition of Economy ....................................................................................................... 16 Implications on sectors in Sri Lankan economy...................................................................................... 17 Effect of Revised Series in the Per-capita GDP (Per-Capita income) ...................................................... 18 Effect of Revised Series in the Budget Deficit......................................................................................... 19 Effect of Revised Series in the GDP implicit price index/ GDP deflator.................................................. 20 Effect of Revised Series in the Tax ratio ................................................................................................. 20 3 Comparison of key Macro- Economic indicators completed under old and new series base years Department of Census and Statistics (DCS), Ministry of policy Planning, Economic Affairs, Child, Youth and Cultural Affairs has released the new series of National Accounts preliminary estimates revising the base year from 2002 to 2010 along with the estimates for the first quarter 2015. Lanka. In the year 2007, following international Executive Summery The GDP is the market value of final goods and services produced within a country in a given period of time. It covers all productive economic activities that provide goods and services for the consumption of different users of an economy. GDP is a tool that can be used to measure the size of an economy. Compiling National Accounts estimates of a country is crucial, because the primary objective of preparing national accounts estimates is using those for policy planning. Therefore, those estimates should be accurate as much as possible. The base year that used to derive constant price estimates, should be revised to represent the real economic situation of a country. Department of Census & Statistics (DCS) as the National Statistics Office (NSO) has completed this tedious task and the preliminary estimates have been released. This note describes, background and rationale of rebasing national accounts estimates, methodologies used and annual and quarterly results. the salient feature of the new series is the uplift of the level of Gross Domestic Product (GDP) by 14.4 percent for the year 2010 (new base year). The structure of Sri Lankan economy has also been changed significantly. There as a tradeoff between contribution of agricultural and industrial activities to the total GDP for almost all years from the new base year. In the new series contribution of agricultural activities to the GDP is lower than that of old series. Background Until the year 2007, National accounts estimates were prepared by both DCS and Central Bank of Sri 4 practice only DCS has been authorized to prepare national accounts estimates for Sri Lanka. What is Gross Domestic Product (GDP) and economic growth rate? Economic growth is the percentage change of real GDP and this measures the quantitative expansion of an economy. Real GDP is derived by removing price effect from GDP at current prices. How is the GDP computed? There are three approaches. Production approach Total value added generated by resident units by engaging economic activities plus net taxes on products Expenditure approach The consumption expenditure of different economic agents in an economy on produced goods and services. Private Final Consumption Expenditure (PFCE) of Household and NPISH, Government Final Consumption Expenditure (GFCE) of General Government, Gross Capital Formation (GCF) of Corporations and Exports are the demand components of an economy. Income approach national accounts is recommended to changed periodically to take into account all above changes This measures the income earned by various economic agents for the supply of factors of production and other resources in an economy such as Compensation of Employees (CE), Consumption of Fixed Capital (CFC), Gross Operating Surplus (OS) and net taxes on production. Why the base year is needed? o Lankan economy. Therefore, The base year of the which has taken place in the economy and to depict a true picture of the economy through macro aggregates like Gross Domestic Product. It is in line with the United Nations recommendation on 2008 SNA which is the manual on compilation of National Accounts and is used all over the world. What are the benefits of rebasing GDP For examining the performance of the economy in real terms through the macroeconomic aggregates like Gross Domestic Product (GDP) is prepared at the prices of selected year known as base year. The estimates at the prevailing prices of the current year are termed as “at current prices”, while those prepared at base year prices are termed “at constant prices”. The comparison of the estimates at constant prices, which means “in real terms”, over the years gives the measure of real growth. The rebasing of national accounts provides a wide range of benefits and a few of are presented as follows. To adopt recommendations of SNA 2008 which has been jointly prepared by the United Nations, World Bank, International Monetary Fund, Organisation for Economic Cooperation and Development and the European Union To describe the real size and rate of movement of the economy during a given period of time Why does GDP need to be rebased? The base year of existing real GDP is 2002 and that is out dated and historical. Therefore economic growth rate or percentage change of real GDP (GDP at constant prices) in the 2002 series may not show the real movement and real size of Sri Lankan economy. Because, Over the past decade, many changes in the structure of production, consumption and prices have occurred in the Sri 5 To improve the quality, accuracy and reliability of estimates To improve the international comparability of the GDP To adopt recommended other internationally improvement to national accounts compilation system the What are the implications of GDP rebasing Adoption of International Standard of The rebasing of GDP brings some impacts on Adoption of Central Product Classification macro-economic indicators such as, (CPC version 2) Industry Classification (ISIC version 4) Increase in nominal GDP, which will lead to Adoption of sector classification increase in per-capita income Development of a Supply and Use Table Change the production structure framework Changing the macroeconomic indicators Use of much accurate and recent source such as budget deficit, investment rate, data savings rate, tax rate and etc The SNA is the internationally agreed standard set Change in the growth rates that are of recommendations on how to compile measures published in the old series of economic activity. The ISIC is the internationally accepted tool in identifying economic activities. Its Why is year of 2010 used as the new base year? main purpose is to provide a set of activity categories that can be used for the collection and International recommendation is to select a much recent and stable year in main economic indicators such as money supply, interest rates and price indices as the base year. Following the recommendation, in depth analysis was undertaken of time series of main economic indicators and assistance were taken from national accounts experts of International Monetary Fund (IMF) for the selection of new base year. representing of statistics relevant to economic Methodology of the exercise In order to make the accounts more meaningful The rebasing exercise was conducted in line with internationally recognized methodology procedures and recommendations. Six major methodological pillars were used to enhance the National accounts compilation framework. Adoption of the System of National Accounts (SNA 2008 version) 6 activities. The CPC is the classification based on the physical characteristics of goods or on the nature on services rendered. Each types of good or service distinguished in the CPC in such a way that is usually produced by only one activity as defined by the ISIC. The CPC covers products that are output of economic activities. and to provide certain analyses, the units making up the economy are grouped into a number of institutional sectors based on their kinds of activities and who owns and controls them. Institutional sectors can be considered as the actors of an economy and those sectors are Financial Corporations (FC), Non-Financial Corporations (NFC), Households (HH), General Government (GG), Non Profit Institutions Serving Households (NPISH) Use of Labour Input Method (LIM) in and Rest of the World (RoW). In the new series calculation of output and Value Added of Gross Output, Intermediate Consumption (IC), economic activities for which that source Gross Value Added (GVA) are recorded separately data are not readily available to estimate according to the sectors. It will provide a facility to Gross Value of Output, Intermediate measure the contribution of each sector to Consumption and Gross Value Added economic activities and this is very important for Adoption of sector classification. policy making. Hence, adopting a sector classification is a turning point of Sri Lankan system Data sources of national accounts. In addition to expanding the coverage of economic Supply and Use table or SUT is a framework that activities during the rebasing exercise, another balances the supply and use for all products and major initiative undertaken was the inclusion of services in an economy. Supply table illustrates the new supply of goods and services produced by domestic administrative data sources, complimented by industries and import from rest of the world. The survey data for selected economic activities. It use table shows the use of goods and services in should be stated here that the rebasing exercise economic activity and final consumption including provided an opportunity for the DCS to engage value added generated in the production process. more directly and more intensively with key One of the main advantages of SUT framework is stakeholder agencies of the national statistical ability to derive GDP by using three approaches system. Particularly, Ministry of Finance, Central namely production, expenditure and income Bank of Sri Lanka, Insurance Board of Sri without Lanka(IBSL), Department of Inland Revenue (DIR), any discrepancies. The important procedural changes made in the new series are sources. These were largely Ceylon Electricity Board (CEB), National Water Incorporation of data on production Supply and Drainage Board and Ceylon Petroleum activities undertaken by the household; Corporation (CPC) and etc. Measurement of output of some crops, live The new series incorporates the latest available animals and construction by using work in results of surveys, and administrative data bases progress method; such as; Adoption of Intermediatary 7 data FISIM (Financial Annual Survey of Industries (ASI), Services Indirectly Labour Force Survey (LFS), Measured) method in calculation of output Household Income and Expenditure Survey of financial related activities; (HIES) Cost of production surveys, Organize awareness meeting for users and Population and Housing Census 2011 stakeholder agencies Value Added Tax (VAT) data base of Organize results validation meeting with Department of Inland Revenue (DIR), key policy makers Trade statistics from Sri Lanka Customs, Result validation technical mission with Balance of Payment statistics (BOP) from International Monetary Fund Central Bank of Sri Lanka Compilation of Merchandise imports and Business statistics of various institutions exports, wholesale and retail trade margins as well as imports and exports of services Main steps of rebasing process Preparation of Supply and Use Table (SUT) The preparatory work for the rebasing exercise commenced in 2011. Since then several activities have been undertaken including; Train the staff locally and internationally, Preliminary estimates of GDP at current and constant prices for quarterly and annually from 2010 to first quarter 2015 has been released herewith. Different estimates for same economic indicators for the same period can be seen in these two series due to above mentioned improvements. Therefore, Gross Domestic Product (GDP) and the economic growth in the new series, theoretically represent the real size and real rate of movement in Sri Lankan economy. trainings Revision Policy Revision of the activity classification in national accounts Finding source data for activities that are newly identified to be included to the production boundary Conduct Ad-hoc surveys and studies on selected economic activities and international technical missions of such as organizations International Monetary Fund (IMF) and Asian Development Bank (ADB) Meeting stakeholders for obtaining accurate and reliable data Collection of price indices Calculation of price and volume indices that are used to derive constant price estimates Preparation of production account 8 Statistics released under the new series Revisions are an essential part of good quarterly national accounts (QNA) compilation practice because it allows to improve national accounts estimates using most accurate, recent data to the maximum extent possible. Resource constraints, in combination with user needs, cause tension between the timeliness for publishing data on the one hand and reliability, accuracy, and comprehensiveness on the other hand. To reduce this tension, typically, preliminary data are compiled initially and later are revised when accurate and reliable data become available. Good management of the process of revisions requires the existence of a well-established and transparent revision policy. Therefore, quarterly and annual national accounts estimates of Sri Lanka in the new series will be revised when much accurate data become available by using well designed revision policy. History of revisions of key economic indicators such as economic growth rate will be presented by a revision triangle and will be available on the DCS web for the convenience of users shortly. External validation of rebased estimates Documents available on rebasing This release is preliminary and a few refinements are being undertaken, including a more extensive use of the Supply and Use Table (SUT) framework. DCS plans to release the revised estimates of the nominal and real GDP along with the expenditure and income estimates end of August 2015. Balanced Supply and Use Table (SUT) will also be published along with above estimates. DCS successfully completed the first Economic Census in the Sri Lankan census history considering 2013 as the reference year. Results of this census will be available by the end of 2015 and data will represent the most accurate size and structure of Sri Lankan economy. Therefore DCS is planning to change the base year again from 2010 to 2013. A brochure that describes the rebasing process and all other improvements made to the Sri Lankan System of National Accounts is already available on DCS web site. Frequently asked questions with answers will be available shortly. Stakeholder involvement in providing source data The rebasing exercise involved a consultative and participatory process that involved various data producers, data suppliers and data users. Specifically, several government Ministries, Departments and Agencies provided sectoral data to facilitate the computation of the GDP estimates. Among these institutions Ministry of Finance, Central Bank of Sri Lanka, Department of Inland Revenue (DIR), Sri Lanka Customs, Board of Investment (BOI), Ceylon Petroleum Corporation (CPC), Sri Lanka Railway, National Jem & Jewelry Authority, Sri Lanka transport Board, Insurance Board of Sri Lanka (IBSL), Ceylon Electricity Board (CEB), Water Supply and Drainage Board and Sri Lanka Tourism Development Authority are the key agencies. In addition, stakeholder workshops were organized to elicit information and also validate the output of the exercise. 9 Apart from internal validation, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) were involved in the validation processes through workshops and technical missions. The way forward Economic activities in the two series Economic activities in the existing series are identified by using International Standard of Industry Classification (ISIC) revision 3. In the new series this is done according to International Standard of Industry Classification revision 04. In the new series, Gross Domestic Product is disseminated in two ways: one is with 48 economic activities. Second one with 10 categories. Agricultural activities Agricultural activities are classified by ISIC Revision 4. In the new series “Plant propagation” and Agricultural supporting activities” that were out of production boundary in the old series are successfully covered. Dissemination categories are decided by considering the production pattern and importance of each crop in Sri Lankan economy. except insurance and Pension funding and auxiliary activities” and “Insurance and Pension funding activities”. In the old series, all Banking, Insurance and Real estate activities were grouped in one single activity. In the new series Real estate” is classified as a separate activity and not regarded as a financial activity. Health and Education services Gross output and Gross Value Added are calculated and disseminated separately as those are crucial in Sri Lankan economy. Industrial activities Manufacturing industry is identified in most disaggregated level so that enhance the user convenience. Sewerage and waste collection is included in to the production boundary which is completely ignored in the old series. Activities in the two series are presented in Table 01 and 02. Services activities Financial activities are classified in to main two activities namely, “Financial services Table 1: Economic activities in old series No 10 Old series No 1 Tea 21 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Rubber Coconut Minor export crops Paddy Livestock Highland crops Vegetables Fruits Plantation Development Firewood & Forestry Other Agricultural Crops Inland - Fishing Marine - Fishing Gem Mining Other Mining Processing (Tea, Rubber and Coconut) Food Beverages Textile, Wearing apparel & leather Chemicals, petroleum, Coal, rubber & plastic 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Old series Non-Metallic Mineral products except products of Petroleum & Coal Fabricated metal Products, Machinery & equipment Other Industries Cottage industry Electricity Gas Water Construction Import trade Export trade Domestic trade Hotels and restaurants Transport- Railway Transport- Passenger and Goods Cargo handling-Ports and Civil aviation Post and telecommunication Banking, insurance and real estate etc. Ownership of dwellings Government services Private services Table 2: Economic activities in New series No New series No New series 1 Growing of Cereals (except rice) 25 Manufacture of other non- metallic mineral products 2 Growing of Rice 26 Manufacture of basic metals and fabricated metal products 3 Growing of Vegetables 27 Manufacture of machinery and equipment i.e.. 4 Growing of Sugar cane, tobacco and other non-perennial crops 28 Manufacture of furniture 5 Growing of fruits 29 Other manufacturing, and Repair and installation of machinery and equipment 6 Growing of Oleaginous Fruits (Coconut, king coconut, Oil palm) 30 Electricity, gas, steam and air conditioning supply 7 Growing of Tea (Green leaves) 31 Water collection, treatment and supply 8 Growing of other beverage crops (Coffee, Cocoa etc..) 32 Sewerage, Waste, treatment and disposal activities 9 Growing of spices, aromatic, drug and pharmaceutical crops 33 Construction 10 Growing of rubber 34 Wholesale and retail trade 11 Growing of other perennial crops 35 Transportation of goods and passengers including Warehousing 12 Animal Production 36 Postal and courier activities 13 Plant propagation and agricultural supporting activities 37 Accommodation, Food and beverage service activities 14 Forestry and Logging 38 Programming and broadcasting activities and audio video productions 15 Marine fishing and Marine Aquaculture 39 Telecommunication 16 Fresh water fishing and Fresh water Aquaculture 40 IT programming consultancy and related activities 17 Mining and quarrying 41 Financial Service activities and auxiliary financial services 18 Manufacture of food, beverages & Tobacco products 42 Insurance, reinsurance and pension funding 19 Manufacture of textiles, wearing apparel and leather related products 43 Real estate activities, Including Ownership of dwelling 20 Manufacture of wood and of products of wood and cork, except furniture 44 Professional services 21 Manufacture of paper products, printing and reproduction of media products 45 Public administration and defense; compulsory social security 22 Manufacture of coke and refined petroleum products 46 Education 23 Manufacture of chemical products and basic pharmaceutical products 47 Human health activities, Residential care and social work activities 24 Manufacture of rubber and plastic products 48 Other personal service activities 11 Comparison of first quarter 2015 estimates in the two series In the new and the old series, Gross Domestic Product (GDP), economic growth rate, structure of the economy, contribution of different activities to the overall growth, GDP deflator represent considerable differences and all these differences are due to adopted improvements to the Sri Lankan system of national accounts in the rebasing process. Changes in the level of GDP A level change of GDP at current prices is a common experience after the rebasing. This happens due to widening the coverage, inclusion of much accurate data and methodological changes. The GDP that measures the size of Sri Lankan economy in the new series stood at 2,740,980 Rs Figure 01 clearly illustrates the changes in the levels of GDP due to the introduction of the new series of national accounts in Sri Lanka. Effect of Revised Series in the growth rates of GDP Economic growth rate or percentage change of GDP at constant prices for the first quarter of 2015 recorded as 6.0 percent compared with the same quarter of the previous year in the new series. In the old series it has recorded as 6.4 percent. Growth rates of the two series are compared Table 03. Table 3: Comparison of growth rates of two series Comparison of Growth rates of the two series- First Quarter (%) Mn level in the first quarter of 2015 while the same recorded 2,607,045 Rs Mn in the old series. Accordingly, the size of Sri Lankan economy is expanded by 5.1 percent due to above 2011 2012 2013 2014 2015 New series 9.8 16.1 3.6 0.7 6.0 Old Series 8.0 8.0 6.1 7.6 6.4 improvements. Figure 1: Gross Domestic Product at current prices in the two series Structure of Sri Lankan economy In the old series, agricultural, industrial and services activities contributed 13.3 Percent, 32.6 percent and 54.1 percent to the GDP at current prices for the first quarter of 2015. The contribution of agricultural and industrial activities decreased to 7.8 percent and 28.7 Percent respectively and for services activities increased up to 56.5 percent in the new series representing the trend towards services dominant economy. The contribution of Agricultural activities in the 12 GDP in the old and new series for the first quarter 2015 is presented in Figure 02. Figure 2: Contribution of major activities to the Gross Domestic Product percent and 65.4 percent respectively. But in the new series, industrial activities contributed negatively to the overall growth rate In the first quarter of 2015. Due to changes of valuation method in the rebasing the summation of Value Added of main three activities is not equal to the GDP. Taxes less subsidies on products need to be added to the Gross Value Added to calculate Gross Domestic Product. Therefore, contribution of Taxes less Subsidies on products to the overall growth is also possible to calculate. Contributions of major economic activities and Taxes less Subsidies on products to the overall growth rate are presented in Figure 03. Contribution to the GDP growth rate Under the old series Agricultural, Industrial and Services activities contributes to the overall growth rate of 6.4 percent 1.3 percent, 33.3 Figure 3: Contribution to overall GDP growth rate Contribution to overal GDP growth rate-First Quarter 2015 % 100% 80% 60% 40% 20% 0% -20% Old series Taxes less Subsidies on products 13 New series 9.2 Services 65.5 96.8 Industry 33.2 -9.7 Agriculture 1.3 3.7 GDP Implicit Price Deflator The ratio of current and constant GDP represents the overall price level of an economy and can be used inflation for a specific period. Under the new series, inflation or percentage change of GDP implicit Price Deflator for the last two quarters recorded lower rates than in the old series. Figure 04 Clearly compare the percentage changes of GDP deflators for the first quarters from 2010. Figure 4: Change of GDP Implicit Price Deflator Comparison of Annual estimates in the two series Changes in the level of GDP The level of annual GDP in the new series is significantly higher than the old series. For the new base year (2010), the level or the size of Sri Lankan economy increased by 14.4 per cent in the new series. Table 4: Gross Domestic Product at Current prices from 2010 to 2014 Year 2010 2011 2012 2013 2014 14 Gross Domestic Product (GDP) at current prices Old series (Rs.Mn) New series (Rs.Mn) Percentage increase 5,604,104 6,413,668 14.4 6,543,313 7,219,106 10.3 7,578,554 8,732,463 15.2 8,674,230 9,592,125 10.6 9,784,672 10,291,581 5.2 Figure 5: Gross Domestic Product at current prices Effect of Revised Series in the annual growth rates of GDP Even though the level of GDP is higher for all the years in the new series, growth rates of the two series showed an irregular pattern. Growth rates for the years 2013 and 2014 are lower than in the old series while for 2011 and 2012 recorded higher growth rates with respect of the old series. Use of much appropriate price and volume indices to derive constant value added in the rebasing is one of significant reasons for these lower growth rates. Table 05: Growth Rates of Gross Domestic Product Comparison of Annual Growth Rates of two series (%) Year Old Series New series 2011 8.2 8.4 2012 6.3 9.1 2013 7.2 3.4 2014 7.4 4.5 15 Structural composition of Economy Structure of Sri Lankan economy has changed after the rebasing due to revision of the reference year and other improvements made to the system in the rebasing process. Most significant implication is the reduction of the contribution1 of agricultural activities to the total GDP from 2010. Figure 6: Contributions of Main activities to GDP in 2010 Having a look at the contributions of major economic activities to the GDP from 2010 to 2014 in old and new series may lead to understand the diversification of Sri Lankan economy. Figure 7: Contribution of Agriculture to the Annual GDP % 14.0 Contribution of Agriculture to the Annual GDP 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2010 2011 New series 1 2012 2013 2014 Old series In old series value added of activities consists both Value Added and relevant taxes less subsidies on products. In the new series, Taxes less subsidies on products calculated separately. Therefore, shares of two series cannot be compared directly. 16 Figure 02: Contribution of Industry to the Annual GDP % 40.0 Contribution of industry to the Annual GDP 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 2010 2011 New series 2012 2013 2014 Old series Figure 09: Contribution of Services to the Annual GDP Contribution of Services to the Annual GDP % 59.0 58.0 57.0 56.0 55.0 54.0 53.0 52.0 2010 2011 New series 2012 2013 2014 Old series Implications on sectors in Sri Lankan economy As discussed before, adoption of sector classification is one of the major improvements added to the system of national accounts when the base year is changed. Therefore, contributions of each sector to economic activities can be assessed in the new system and these implications are much important in policy making. Sector accounts are published in annual basis, from 2010 and onwards, for the convenience of policy makers and researches. Some of the implications regarding sectors in the new series are presented in table 06 and 07. 17 Table 06: Contribution to different sectors to the economy Contribution of sectors to the economy Year NFC 2010 2011 2012 2013 2014 FC 35 34.9 36.1 35.7 34.8 GG 5.8 4.2 4.3 4.2 4.2 9.9 10 8.7 9 9.5 HH 49.3 50.9 50.9 51.1 51.5 The striking feature table 06 explains is “the biggest contributor to the total economy is household sector”. Its contribution is 49.3 percent. Non financial corporation (NFC), Financial Corporation (FC), and General Government (GG) sectors responsible for 35 percent, 5.8 percent 9.9 percent of total GDP. These ratios remained unchained throughout the years. Table 07 explains a different story on Sectors in Sri Lankan economy. According to the table, Financial Corporation (FC) sector engage only services activities while Non-Financial Corporation (NFC) and Household (HH) sectors engage all agricultural, Industrial and Services activities. General Government (GG) largely engage Services activities including “Public administration”, “Health” and “Education”. Table 07: Contribution of different sectors to main activities in 2010 Contribution of sectors to main activities in 2010 NFC Agriculture Industry Services Total FC 4.8 53.6 41.5 99.9 GG 100 100 0 3.9 96.1 100 HH 15.8 21.3 62.9 100 Total economy 9.5 29.7 60.9 Effect of Revised Series in the Per-capita GDP (Per-Capita income) The per-capita income in current terms is estimated at 2984 US $ for 2010 in the new series as against 2400 US $ for the same year in the old series registering 24.3 percent increase. Even thought this is significant increase, Sri Lanka is still in low middle income country in the World Bank income classification. It is still below Annual Per-capita income from 2010 to 2014 are presented in table 08. 18 Table 08: Percapita Gross Domestic Product in two series Per-Capita GDP Indicator Gross Domestic Product (Old series) Gross Domestic Product (New series) Mid year population(Million) Percapita GDP (Old series-Rs) Percapita GDP(New series-Rs) Exchange Rate Percapita GDP(Old series- US $) Percapita GDP(New series-US $) 2,010 2011 2,012 2013 2,014 5,604,104 6,543,313 7,578,554 8,674,230 9,784,672 6,413,668 7,219,106 8,732,463 9,592,125 10,291,581 20.03219 20.21505 20.42400 20.57900 20.77100 279,755 323,685 371,061 421,509 471,074 320,168 357,115 427,559 466,112 495,478 113 111 128 127 131 2,474 2,927 2,908 3,316 3,608 2,832 3,230 3,351 3,667 3,795 Figure 3: Percapita Gross Domestic Effect of Revised Series in the Budget Deficit Budget deficit represents the difference between estimated government Revenue and the expenditure as a percentage of Gross Domestic Product, decreased slightly for all the years from 2010 due to increase of Gross Domestic Product at current prices. Comparison of this indicator between two series is presented in Figure 11. 19 Figure 4: Budget Deficit as a percentage of GDP Effect of Revised Series in the GDP implicit price index/ GDP deflator GDP deflator, the ratio between GDP at current prices and constant prices represented as an index and that can be used to measure the changes of price level (Inflation) of overall economy for the years from 2010 to 2014 has considerably changed due to revised price and volume indices used to derive constant price estimates. In this process, the 2002 outdated price structure was taken to the much recent year of 2010. Therefore, accuracy of estimates of GDP deflator is increased in the new series and the comparison is presented in Figure 12. Figure 5: Percentage change of GDP Implicit Price Deflator Effect of Revised Series in the Tax ratio Government tax revenue as a percentage of GDP at current prices which represents government effort to tax collection has reduced from 12.93 to 10.72 due to increase the level of GDP at current prices in 2010. Annual tax ratio from 2010 to 2014 are presented in table 09. 20 Table 09: Tax Revenue Tax Revenue Indicator 2011 2012 724,747 812,611 908,913 1,005,895 1,050,362 5,604,104 6,543,313 7,578,554 8,674,230 9,784,672 6,413,668 7,219,106 8,732,463 9,592,125 10,291,581 Tax ratio (Old series) 12.93 12.42 11.99 11.60 10.73 Tax ratio (New series) 11.30 11.26 10.41 10.49 10.21 Tax Income (Rs Mn) Gross Domestic Product (Old series Rs Mn) Gross Domestic Product (New series-Rs Mn) 21 2010 2013 2014