European system of national and regional accounts - ESA 2010 - Statistics Explained

European system of national and regional accounts - ESA 2010

The European system of national and regional accounts (ESA 2010) is the newest internationally compatible EU accounting framework for a systematic and detailed description of an economy. ESA 2010 differs in scope as well as in concepts from its predecessor ESA 95 reflecting developments in measuring modern economies, advances in methodological research and the needs of users. This article presents ESA 2010 and its main differences with ESA 95.

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Why are we changing the ESA?

The current methodological framework for producing national accounts data (ESA 1995) is almost twenty years old. Over these last twenty years, substantial changes have impacted economies, in particular the increasing role of information and communication technologies in production processes, the growing importance of intangible assets, intellectual property products and services, and the globalisation of economic systems. The way in which macroeconomic statistics are compiled needs to be adjusted accordingly, to reflect these changes. It is not a revolution, but a necessary adaptation.

It is important to stress that this adaptation of the system of accounts is not only European, but world-wide. Europe's ESA 2010 is the counterpart of the 2008 system of national accounts (2008 SNA), adopted by the United Nations Statistical Commission, which is in the process of being implemented all around the world. It has already been implemented in several countries like USA, Australia and Canada.

When will EU statistics be affected by the new ESA?

The former methodological framework (ESA 95) was replaced in September 2014 with the new European system of accounts (ESA 2010). Information based on ESA 2010 is now available in the Eurostat online database.

What are the main changes?

  • Research and development expenditure is counted as investment. Expenditures on research and development (R&D) have the nature of an investment and contribute to future economic growth. This is the major improvement introduced by ESA 2010.
  • Expenditure on weapon systems is counted as investment. The new system recognises the productive potential of expenditure on weapon systems for the external security of a country, over several years. This identifies them as investment.
  • A more detailed analysis of pension schemes. A compulsory supplementary table transparently shows the liabilities of all pension schemes, including those of government whether unfunded or funded, in order to improve comparability between countries. At the same time the increase of pension entitlements in defined benefit schemes is to be recorded in an actuarial way; independently from actual contributions.
  • Goods sent abroad for processing. The value of goods sent abroad for processing will no longer impact on gross exports and imports figures because ESA 2010 uses a change in ownership approach and is no more based on physical movements. ESA 2010 just records an export processing service. This will reduce the level of exports and imports, but will not affect the overall current account balance.

What is the impact of ESA 2010 on GDP?

As a consequence of the ESA 2010 implementation and the introduction of other statistical improvements the level of EU-28 gross domestic product (GDP) rose by 3.7 % in 2010.

  • The methodological changes increased EU-28 GDP by 2.3 %
  • The statistical improvements accounted for a revision of 1.4 %.

The most significant ESA 2010 methodological changes have been the capitalisation of research and development expenditures and expenditures on weapons systems which revised EU-28 GDP by 1.9 % and 0.2 %, respectively. By way of comparison, it is worth mentioning that, in the United States, the introduction of the new international standards led to an increase of 3.5 % in the level of GDP, with the capitalisation of research and development accounting for 2.5 %.

While there is an impact on the GDP levels, the effect of the changes on growth rates for both the EU and the euro area aggregates is very limited. The change in the annual GDP growth rates over the years 1997-2013 was around +/-0.1 percentage points for the EU-28.

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