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How the revision of the European System of Accounts (ESA 2010) impacts research and development statistics

 

Brussels, 17 November 2014

In September 2014, the European System of Accounts (ESA), which sets down the harmonised methodology used for the production of national accounts data in the EU, was revised. ESA 2010 replaced the previous methodology ESA 1995 to reflect the substantial changes of the economic environment.

This adaptation of the system of accounts is not only European, but world-wide.

This document summarises the main changes brought by ESA 2010 and their impact on Research and Development (R&D) statistics.

 

1. Main changes from ESA 1995 to ESA 2010

  • R&D expenditure is now counted as investment and hence adds to GDP. This increased the level of EU GDP in 2010 by 1,9%
  • Expenditure on weapon systems is now counted as investment. This increased the level of EU GDP in 2010 by 0,2%

 

2. ESA 2010 shifts level of EU GDP upward

The impact of the methodological changes in ESA 2010 amounts to an increase of EU GDP of 2,3%, 1,9% of which are due to R&D expenditure.

It gives also rise to shifts in the GDP levels of most Member States.

More information on the impact of ESA 2010 on the level of GDP can be found in EUROSTAT press release PDF icon.

 

3. Member States will need to spend more in absolute terms to reach their national R&D targets

The larger GDP impacts on the many indicators which use GDP as a denominator, including:

  • the R&D intensity indicator (amount of R&D investment/GDP). As ESA 2010 gives rise to shifts in the GDP levels of most Member States, Member states will have to spend more in absolute terms to reach their national R&D targets. Member States with a high R&D intensity are affected more by the revision than Member States with a low R&D intensity.
    The fact that the spending on R&D increases GDP creates additional incentives for spending on R&D.
  • the EU 2020 headline indicator (target of 3% of EU's GDP be invested in R&D). The lower R&D intensity caused by the revision will make it more difficult for the EU to reach the 3% target. For the EU28, this implies additional spending of about €8 billion per year to reach the 3% target by 2020. In 2012 R&D expenditure as a percentage of GDP in EU 28 amounted to 2,08% (according to the data based on the old national accounts). The increase in EU GDP stemming from the ESA 2010 revision led to a decrease of this figure to 2,01%.


Source: DG Research and Innovation - Unit for the Analysis and Monitoring of National Research Policies
Data: Eurostat, OECD, Member States
  1. The R&D intensities (old methodology) for 2012 were calculated from the latest available R&D expenditure data and GDP (ESA95) data for 2012.The values do not always correspond to the R&D intensities published by Eurostat on 15 May, 2014 because of revisions made to some of the data since that date. In fact, R&D intensity for the EU for 2012 was revised upwards from 2.07% to 2.08%.
  2. IE, US, JP, CN, KR: 2010-2012; NL, RO, SI: 2011-2013.
  3. CZ: A target (of 1%) is available only for the public sector.
  4. IE: The national target of 2.5% of GNP has been estimated to equal 2.0% of GDP.
  5. US: R&D expenditure does not include most or all capital expenditure.
  6. US: The R&D Intensity target of 3.00% does not have a deadline.
  7. Values in italics are estimated or provisional.
: = not available

Background

The European System of Accounts (ESA) sets down the harmonised methodology used for the production of national accounts data in the EU. It ensures that statistic on EU Member States are compiled in a consistent, comparable, reliable and up-to-date way.

The previous methodology for producing national accounts data (ESA 1995) needed to be updated to reflect the substantial changes economies had gone through: increasing role of ICT in production processes, growing importance of intangible assets, intellectual property products and services and the globalisation of economic systems.

The update of the methodology is accompanied by the incorporation of statistical improvements in most Member States data.

This adaptation is not only European but world-wide. Europe's ESA 2010 is the counterpart of the 2008 SNA, adopted by the United Nations Statistical Commission, which has already been implemented in the USA, Australia and Canada.