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Final Expenditures

ICP comparisons are made from the expenditure side of the national accounts with the object of converting the final expenditures of countries to internationally comparable real expenditures. This requires countries to supply a detailed breakdown of final expenditure on GDP for the comparison year. As the detailed expenditures are used as weights in the calculation of PPPs and in the estimation of real expenditures, they need to be harmonized across countries. Countries are required to report their final expenditures according to a common classification.

 

The common classification used by the ICP adheres to the definitions, concepts, classifications and accounting rules of the 1993 SNA. It is structured by type of final expenditure - individual consumption expenditure, collective consumption expenditure, and gross capital formation - and, in the case of individual consumption expenditure, by purchaser - households, NPISHs and government. Within this structure, final expenditures are broken down into main aggregates, expenditure categories, expenditure groups, expenditure classes, and basic headings as shown in the table below. 

 

Main Aggregate

Expenditure
Categories

Expenditure
Groups

Expenditure
Classes

Basic
Headings

Individual consumption expenditure by:

 

 

 

 

·         Households

13

43

90

110

·         NPISHs

1

1

1

1

·         Government

5

7

16

21

Collective consumption expenditure by:

 

 

 

 

·         Government

1

1

5

5

Gross capital formation:

 

 

 

 

·         Gross fixed capital formation

3

6

11

12

·         Changes in inventories and valuables

2

2

2

4

·         Balance of exports and imports

1

1

1

2

GDP

26

61

126

155

 

Basic heading are the lowest level of aggregation for which final expenditures can be estimated. In theory, they should cover a homogeneous set of goods or services, but, in practice, they can cover a broader range of products than is theoretically desirable. Basic headings are the building blocks of ICP comparisons. It is at the level of the basic heading that expenditures are defined, products are selected for pricing, and prices are collected and edited.

 

It is also at the basic heading level that PPPs are first calculated and averaged. The final expenditures at the basic heading level provide the weights with which basic heading PPPs are aggregated and averaged to derive PPPs for classes, groups, categories, aggregates and GDP. It is these PPPs that are used to convert final expenditures to real expenditures at each level of aggregation. The ICP publishes PPPs, price level indices, real expenditures and volume indices for GDP, main aggregates and selected expenditure categories.

 

Results of ICP comparisons are presented by who consumes: households or government. This is because one of the principle aims of the ICP is to compare the actual individual consumption (of households) across countries at various levels of aggregation.

 

However, in the ICP classification, individual consumption expenditure is structured by who pays: households, NPISHs or government. Their individual consumption expenditures have to be combined to obtain actual individual consumption. The ICP classification is designed to allow the three sets of individual consumption expenditures to be combined at the lowest level of aggregation feasible. For households and government, this tends to be the basic heading level. For NPISHs, the level is higher because countries generally do not have detailed data for NPISHs.

 

ICP Classification of Final Expenditure on GDP 

 GDP




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