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2010 Philippines Financial Social Accounting Matrix (PFSAM 2010)

Executive Summary

1. The PFSAM 2010 was compiled based on the comprehensive conceptual and accounting framework of the United Nations’ 2008 System of National Accounts (SNA). It provides an overview of the real and financial transactions in the economy. It presents the connection from the multi-industrial relationships in production to the multi-sectoral distribution of income, consumption, investment in produced and non-produced assets and financial instruments, and the interlinkages among the domestic institutions, and between these institutions with the Rest of the World (ROW).

2. It provides a comprehensive database that can be used to assess the performance of the

economy. It also serves as a statistical framework for identifying data gaps/weaknesses as well as inconsistencies in the related macroeconomic aggregates. This could serve as bases for statistical developmental activities towards addressing data deficiencies and inconsistencies for a more reliable official statistics.

3. Major findings of PFSAM 2010 are:

- Household-based enterprises played a significant role in the economy’s production activities contributing 39.9 percent to the Gross Domestic Product (GDP). The household sector also had the largest share of the Gross National Income (GNI), given that mixed income and compensation which accrue to the household sector contributed about 64.6 percent of the GDP. Furthermore, the compensation earned abroad by resident Overseas Filipinos’ (OF) supplemented said domestic-sourced income. The household sector’s income was also supported by current transfers, primarily in the form remittances of non-resident OFs.

- The Non-financial Corporations (NFCs) sector was the largest saver in the economy followed by the household sector. Thus, the NFCs financed their investment demand (also the highest), which includes both real and financial investments, mainly with their saving and with only 35.4 percent sourced through the incurrence of liabilities, largely in the form of loans and equities.

- Except for the general government, all sectors were net lenders whose gross saving provided basically all the funds for gross capital formation and asset acquisition. Deposits and debt securities emerged as the domestic economy’s most preferred financial instrument for net fund provision.

- Domestic production accounted for 84.2 percent of the total supply of goods and services, while the rest was sourced from the rest of the world (ROW). Of the total supply, 87.8 percent was absorbed by domestic institutions mainly as intermediate inputs for production activities. The remaining was exported to the ROW, largely from the manufacturing and real estate and business service industries, exporting 16.8 percent and 14.9 percent of their production, respectively. Their combined exports comprised 81.7 percent of the country’s total exports.

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2010 Philippines Financial Social Accounting Matrix (PFSAM 2010) 1 I. Introduction and background

The PFSAM 2010 (hereafter PFSAM) provides an overview of the real and financial transactions in the economy. The main objective of PFSAM is to connect the multi-industrial relationships in production to the multi-sectoral distribution of income, consumption, investment in produced and non-produced assets and financial instruments and the interlinkages between the domestic institutions and these institutions with the Rest of the World (ROW).

It provides a comprehensive database on the economy and can be used to assess the

performance of the economy. The PFSAM helps analyze the structural roles and relative importance of not only the industries but also the institutional economic decision makers such as corporations, government and households, with respect to their contribution to Gross Domestic Product (GDP), gross capital formation, final consumption and their financial transactions. It helps identify, for instance, the sources of income by type and their relative importance to each institutional sector in the economy. It also shows the behaviors of institutional sectors in the use of their disposable income (either for final consumption or saving their build-up of capital formation and the financing of their deficit through incurrence of liabilities or disposal of financial assets. As such, the PFSAM also serves as input to a financial computable general equilibrium model to simulate responses to what-if questions using policy or behavioral assumptions.

The PFSAM2 was compiled based on the comprehensive conceptual and accounting

framework of the United Nations’ 2008 System of National Accounts (SNA). The PFSAM integrates data for 2010 prepared separately by different units/agencies—the Philippine Statistics Authority’s (PSA) System of National Accounts (SNA), and the BSP’s Philippine Flow of Funds (PFOF) and Balance of Payments (BOP). The PFSAM also serves as a statistical framework for identifying data gaps/weaknesses as well as inconsistencies in the related macroeconomic aggregates. This could serve as bases for statistical developmental activities towards addressing data deficiencies and inconsistencies for a more reliable official statistics.

The same set of worksheets can be used to produce similar database for subsequent years. As a time series, the PFSAM allows for the monitoring of changes in the structure of the Philippine economy and changes in the behaviors of the institutional sectors in the economy.

1 The 2010 Philippines Financial Social Accounting Matrix was constructed by the Department of Economic Statistics Flow of Funds Sub-group—Fe M. Canillas, Nashrine B. Aliping, Jean Christine A. Armas, Marissa M. Duque, Ma. Francesca D. Grabador, Ma. Teresa S. Perez, Marcelina SJ Perez and Tatum Blaise P. Tan—under the supervision of Deputy Director Marriel M. Remulla of the Monetary and Financial Statistics Group; and Lilia V. Elloso, Bank Officer V, and Director Laura L. Ignacio of the Center for Monetary and Financial Policy.

2 Details on the construction of the PFSAM is presented in Annex A.

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In form, the PFSAM is a comprehensive all-in-one large matrix that integrates the sub-matrices, representing the conventional SNA integrated institutional sector accounts (T-accounts). Annex A, Tables 1 and 2, respectively, show the condensed forms of the PFSAM in matrix form and T-accounts, or simply matrix form and SNA, for illustration purposes. The rule in compilation is to ensure as much as possible the equality between total uses (column sums) and total resources (row sums) for every account. Each account, which corresponds to a particular group of transactions in the SNA, is presented in a matrix format and is referred to as a sub-matrix.

This report presents the findings of the PFSAM for 2010. Section II reviews the

economic and financial developments in 2010. Section III describes the Philippine economy as represented by the PFSAM 2010. Section IV summarizes the findings and discusses forthcoming PFSAM work.

II. The year 2010 revisited

In 2010, the global economy was recovering, albeit at multi-speed, with emerging markets (particularly emerging Asia) driving global growth and advanced economies experiencing sluggish growth. On one hand, the European Union was then going through its sovereign debt crisis. Emerging market economies, on the other hand, were faced with strong capital inflows.

The Philippines was experiencing growth within a low-inflation environment. The average headline inflation was 3.8 percent, which was within the Government’s target range of 3.5-5.5 percent for the year, but lower than the 4.2 percent average in the previous year. The economy grew by 7.6 percent led by the services and industry sectors contributing to GDP growth by 4.0 percent and 3.6 percent respectively. On the demand side, exports and investments were the main growth drivers contributing to GDP growth by 9.4 percent and 5.4 percent, respectively. This was supported by strong private consumption with 2.4 percent contribution to growth. The benign inflation environment allowed the BSP to keep policy rates steady during the year—the overnight reverse repurchase (RRP) rate was kept at 4 percent.

In the external front, the current account had a surplus of US$7.2 billion, supported by receipts from remittances of overseas Filipinos (OFs) and exports of services, particularly business process outsourcing. Remittances from OFs coursed through the banks amounted to US$18.8 billion, about 7.8 percent of GNI. The Gross International Reserves (GIR) reached US$62.4 billion as of end-December 2010, sufficient to cover 10.4 months’ worth of imports of goods and payments of services and income, and about six times the country’s short-term external debt based on original maturity and four times based on residual maturity. The Philippine peso was broadly stable and competitive, and appreciated by 5.6 percent to an average of PhP45.11/US$1 for the year.

Philippine banks had a strong performance in 2010 with “steady asset expansion, sustained credit growth, growing deposit base, ample liquidity, continuing improvement in

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overall asset quality, and above standard solvency ratios.”3 Banks had net profit amounting to PhP91.2 billion (31.4 percent higher than previous year) from “trading of derivatives and government securities and sustained growth in lending–related revenues.”4

Due to the decline in yields and the availability of other investment products such as

trust products, deposit liabilities had a modest growth of 9.6 percent. There was likewise a moderate credit expansion for the year. Total loans outstanding (net of interbank loans) grew by 8.5 percent to PhP3,071.4 billion.

III. The Philippine economy from the perspective of the PFSAM 20105

A. Production and income accounts

1. Overview of the real economy. Under the expenditure approach, household final

consumption expenditure was the highest contributor to GDP at 77.3 percent, and government consumption was the least at 10.1 percent (Table A-1). Using the income approach, mixed income contributed 34.9 percent of GDP while compensation of employees made up about 29.7 percent.

2. Use of goods and services. About 87.8 percent of the total supply (domestic production and imports) was absorbed by domestic institutions for their production activities, final consumption and capital formation (Table A-2). All or almost all outputs of electricity, gas and water; public administration and defense; construction; financial intermediation services; agriculture, hunting, forestry and fishing were consumed domestically. The manufacturing industry exported 16.8 percent of its production, contributing about 69.5 percent to the country’s total exports. Real estate and business services ranked next—the sector exported 14.9 percent of its output comprising 12.2 percent of total exports. About 7.6 percent of total supply was used for capital formation which totaled PhP1,532 billion. Of this amount, 62.1 percent was provided by construction, 30.6 percent by manufacturing.

3. Supply of goods and services. About 84.2 percent of the total supply of goods and services were from domestic production. Real estate and business services products were secondary outputs of majority of the industries. Imports amounted to PhP2,958 billion or about 14.7 percent of the total supply of goods and services.6

4. Structure of production and primary incomes generated. Gross Value Added (GVA) accounted for about 47.1 percent of the total inputs to production—from 26.2

3 BSP’s Status Report on the Philippine Financial System, Second Semester 2010.

4 Ibid.

5 Analysis follows that of Vu et al. (2013).

6 The remaining 1.1 percent is accounted by import duties.

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percent GVA Ratio (GVAR) in manufacturing to 75.3 percent GVAR in agriculture, hunting, forestry and fishing (Table A-4). The value added contribution of the different industries and the types of factor

incomes generated are shown in Table A-3. About half of GDP was accounted for by manufacturing (19.6 percent), trade (18.7 percent) and agriculture, hunting, forestry and fishing (14.2 percent). Close to two-thirds of the total compensation generated by production were paid by Public Administration (23.9 percent), manufacturing (16.4 percent), trade (12.9 percent) and agriculture, hunting, forestry and fishing (11.0 percent).

Compensation paid out of the GVA generated in the economy was highest in public administration at 99.5 percent (Table A-4). Mixed income generated out of the GVA was in “other services” (62.4 percent); real estate, renting and business activities (54.8 percent); agriculture, hunting, forestry and fishing (52.5 percent); and trade (49.1 percent), which indicates that household production was predominant in these industries.

5. The cross-classification of production by industry to institutional sectors

(Tables A-5 and A-6), showed that the non-financial corporations (with 47.6 percent share) and households (with 41 percent share) together accounted for 88.6 percent of domestic production.

6. Balance of primary Incomes or Gross National Income (GNI). The household sector had the largest share of the GNI with its balance of primary incomes amounting to PhP6.1 trillion or 74 percent of the total GNI. The household sector, which also had the largest net current transfers received, remained as the sector with the highest level of disposable income among the domestic institutions.

7. Sources and uses of income. Table A-7 summarizes the sources and uses of income for the different institutions:

Households and Non-profit Institutions Serving Households (NPISHs): 76.4 percent of income came from mixed income (39.5 percent) and compensation income (36.9 percent); 12.5 percent came from transfers. A large share of household income was spent on consumption (87.6 percent).

Non-financial corporations (NFCs): 80.6 percent of total income was from operating surplus and 16.2 percent from property income. Of the total income generated, 35.6 percent was spent on property expenses and 48.1 percent was saved.

Financial corporations: Of the total income 73.8 percent was property income and 24.5 percent was operating surplus. Property expense accounted for 74.7 percent of total use of income.

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General Government: 64.4 percent of government’s income came from taxes. About 46.6 percent of its income was spent on consumption.

- Income taxes, accounting for 27.6 percent of the government’s total income

(GDI), were mainly from corporations. Corporate income taxes made up 71.6 percent of total income taxes and 19.8 percent of general government’s income. Income tax from the household sector amounting to PhP140 billion, accounted for 28.4 percent of total income taxes. If we assume that the tax base for household income taxes is the sum of compensation of employees amounting to PhP2,440 billion, then the household income effective tax rate was about 5.7 percent. Inclusion of mixed income would further reduce the household income effective tax rate.

- Other taxes on production and taxes on products were the second largest source of government tax revenues, about 24.3 percent of the government’s income. Import duties were also an important source and made up 12.5 percent of government’s income. Almost half (46.6 percent) of government income was spent on consumption.

Rest of the world: 91.2 percent of the ROW’s income came from the domestic economy’s import of goods and services.7 About three-fourths of ROW’s total use were on payments of the country’s export of goods and services (75.8 percent). Meanwhile, remittances of Overseas Filipinos (OFs) accounted for 31.9 of the ROW’s payments—24.9 percent representing current transfers of non-resident OFs and 7 percent compensation earned abroad of resident OFs. OF remittances totaled US$18,763 million in 2010.8

B. Capital and financial accounts

1. Linking the current account to the capital and financial accounts. The link between the current accounts and accumulation accounts of the economy is provided by the saving of the institutions which represent the balances of their respective current accounts. As the balancing item, saving is carried forward into the capital account. Saving by institution. Saving is what remains after deducting final consumption

expenditures of households and government from their respective disposable incomes. For corporations, disposable income is equal to their saving.

NFCs generated the largest saving at PhP1,100 billion (representing 59.3 percent

of total saving of the economy), mainly on account of increased revenues and adoption of cost-efficient measures. Moreover, the benign inflation environment as well as the low interest rates (on borrowings) also contributed to manageable

7 The ROW transactions are the mirror image of the Balance of Payments (BOP) transactions, which are from

the point of view of the domestic economy. 8 Remittances coursed through banks.

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operational costs and, subsequently, higher corporate saving.9 The next biggest saver was the household sector at PhP483 billion (26.1 percent) (Table 1).

2. Sectoral financing. Total investments by institutions amounted to PhP4.5 trillion with PhP1.5 trillion in physical investments and about PhP3.0 trillion in financial assets. This was financed by PhP1.9 trillion of saving and PhP2.7 trillion in financial liabilities (Table 1). Non-financial corporations had the biggest investment in real asset at

PhP870 billion, followed by households and NPISHs with PhP318 billion, and the general government with PhP273 billion.

Non-financial corporations also have the largest saving-investment surplus of PhP230 billion, followed by the households and NPISHs with PhP165 billion. The general government had a saving-investment deficit of PhP90 billion.

3. Non-financial corporations financed their real investment mostly (64.6 percent) from

their saving and only 35.4 percent through the incurrence of liabilities, largely in the form of loans and equities.

4. The considerable saving of households and NPISHs were used to acquire real investment accumulating to PhP318 billion, to pay PhP3 billion financial liabilities, as well as to add PhP164 billion to their financial assets, mostly in the form of currency and deposits and equities.

5. The PhP519 billion investment demand of the government sector was financed largely (73.2 percent) through the issuance of debt securities and incurrence of loans.

6. 94.9 percent of the funds available to financial corporations were in the form of

financial liabilities consisting mainly of currency and deposits (71.5 percent), loans (4.7 percent) and equities (4.7 percent). These funds were used to acquire financial assets (96.2 percent) such as currency and deposits (51.7 percent), and debt securities (38.1 percent).

7. Overall, the domestic economy was in a net lending position with the rest of the

world, with a total saving of PhP1,855 billion (Table A-8), which was consistent with the strong economic performance in 2010. Except for the general government, all sectors were net lenders whose gross saving were a key source of funds for gross capital formation and asset acquisition. Deposits and debt securities emerged as the domestic economy’s preferred financial instruments for net fund provision. Financial transactions with the rest of the world were likewise dominated by issuances and purchases of debt securities.

9 BSP’s 2010 Philippine Flow of Funds.

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Table 1. Sectoral Financing Patterns, in Billion Pesos

Note: Details may not add up due to rounding.

IV. Summary and moving forward

1. The PFSAM 2010 provides an overview of the real and financial transactions in the

economy. It presents the connection from the multi-industrial relationships in production to the multi-sectoral distribution of income, consumption, investment in produced and non-produced assets and financial instruments, and the interlinkages among the domestic institutions, and between these institutions with the ROW.

2. In 2010, economic growth was driven by consumption. Mixed income and compensation which accrue to the household sector contributed about 64.6 percent of the GDP. Expectedly, the sector had the largest share of the GNI with said income from domestic production supplemented by the compensation earnings abroad of resident OFs. The household sector’s income was also supported by current transfers, primarily in the form of remittances of non-resident OFs.

3. The large share of mixed income in agriculture, hunting, forestry and fishing; trade;

real estate, renting and business activities; manufacturing; and other services, indicated the predominance of household production in these economic activities.

4. The NFCs was the largest saver (59.3 percent of total) in the economy followed by the household sector (26.1 percent). Thus, the NFCs financed their investment

Value

(P billion)

Households & NPISHs 483 26.1 (3) -0.6 481

Non-financial

Corporations 1,100 59.3 601 35.3 1,701

Financial Corporations 94 5.1 1,744 94.9 1,838

General Government 178 9.6 4 337 64.9 519

Total 1,855 100.0 4 2,679 59.0 4,538

Households & NPISHs 318 20.8 164 34.0

Non-financial

Corporations 870 56.8 831 48.9

Financial Corporations 71 4.7 1,766 96.2

General Government 273 17.8 246 47.5

Total 1,532 100.0 3,007 66.3

519

4,539

B. Uses of Funds

Total

482

1,699

1,837

Institutions

Capital formationNet Acquisition of

Financial Assets

Value % of Total Value % of Total

Institutions

SavingsNet Incurrence of Financial

Liabilities

Total

Value % of Total % of Total

Net Capital

Transfers

A. Sources of Funds

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demand (also the highest) mainly with their saving and only 35.4 percent sourced through the incurrence of liabilities, largely in the form of loans and equities.

5. The domestic economy was in a net lender position with the rest of the world, which was consistent with the strong economic performance in 2010. Except for the general government, all sectors were net lenders whose gross saving were a key source of funds for gross capital formation and financial asset acquisition. Deposits and debt securities emerged as the domestic economy’s preferred financial instruments for net fund provision. Financial transactions with the rest of the world were likewise dominated by issuances and purchases of debt securities.

The PFSAM process

6. A major outcome, albeit indirect, of the construction of the PFSAM 2010 is the adoption of a new approach—the full Sequence of Accounts (SOA)—in the compilation of the Philippine Flow of Funds. In addition to improving the compilation of saving, this also enhanced the estimates for the rest of the accounts in the PFSAM, as the SOA ensures the interconnectedness of the different accounts from production to the financial accounts.

7. Moving forward, the construction of the PFSAM 2016 is underway that will make use of the SOA and the 2016 Philippine Flow of Funds as well as the updates of the latest 2012 benchmark input-output tables. Perhaps, more important than the description of the productive industries and economic institutions is the use of the PFSAM to policymaking through its application in economic modeling and analysis. It was, in fact, constructed primarily to be used as database for the development of a financial computable general equilibrium (FCGE) model that would evaluate effects of monetary policies on the various industry sectors and economic institutions.

References Bangko Sentral ng Pilipinas 2010a. “2010 International Investment Position of the

Philippines.” _____ 2010b. “2010 Philippine Flow of Funds.” _____ 2010c. A Status Report on the Philippine Financial System Second Semester. _____ 2010d. Annual Report Volume 1. _____ 2010e. “Balance of Payments Developments.” _____ 2010f. Inflation Report. Fourth Quarter.

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United Nations, European Commission, International Monetary Fund, Organisation for Economic Cooperation and Development and World Bank (2009). “System of National Accounts, 2008 (2008 SNA).” New York.

Vu Quang Viet (2012). “Philippines Financial Social Accounting Matrix (PFSAM) of 2009.”

Consultant’s final report. Vu Quang Viet, F. Secretario, L. Ignacio, M. Remulla, R. Juinio and L. Elloso (2013). “A

Financial Social Accounting Matrix for the Philippines.” Paper presented at the 12th National Convention on Statistics (NCS), 1-2 October 2013, Mandaluyong City.

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Appendix A. Tables

Table A-1. Expenditure and Income Approaches of GDP


Table A2-2. Use of Goods and Services, in Billion Pesos


In Billion Pesos % of GDP

Household Final Consumption Expenditure 6,340 77.3

Government Final Consumption Expenditure 831 10.1

Gross Capital Formation 1,532 18.7

Exports 2,459 30.0

Imports (2,958) (36.1)

Gross Domestic Product 8,203 100.00

Compensation of Employees 2,440 29.7

Net Taxes on Production and Products 433 5.3

Mixed Income 2,862 34.9

Import Duties 222 2.7

Gross Operating Surplus 2,247 27.4

Gros Domestic Product 8,203 100.00

Expenditure Approach of GDP

Income Approach of GDP

Households Government Levels% of Gross

Output

Agriculture, Hunting, Forestry and Fishing 1,136 597 87 1,820 96.5 66 1,886

Mining and Quarrying 468 - - 468 77.8 134 602

Manufacturing 4,910 3,082 468 8,459 83.2 1,708 10,167

Construction 71 78 951 1,100 99.6 4 1,104

Electricity, Gas and Water Supply 491 222 - 713 100.0 - 713

Trade and Repair of Motor Vehicles, Motorcycles,

Personal and Household Goods - - - - - - -

Transportation, Storage & Communication 244 593 - 837 87.6 118 955

Financial Intermediation 287 194 15 - 496 99.2 4 500

Real Estate, Renting and Business Activities 1,065 656 - 1,721 85.1 301 2,022

Public Administration and Defense:Compulsary Social

Security- 18 816 - 834 100.0 - 834

Other Services 283 912 26 1,220 90.8 124 1,344

TOTAL 8,955 6,353 831 1,532 17,671 87.8 2,459 20,130

Total

SupplyProducts

Final Consumption Domestic AbsorptionIntermediate

Inputs

Gross Capital

FormationExports

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Table A-3. Gross Value Added and Incomes Generated, by Industry, in Percent


Table A-4. Incomes Generated as Percentage of Gross Value Added, by Industry


IndustryCompensation

of Employees

Taxes on

Production

excluding

Import

Duties

Operating

Surplus

Mixed

Income

Gross

Value

Added

Agriculture, Hunting, Forestry and Fishing 11.0 3.0 11.4 20.8 14.2

Mining and Quarrying 1.1 3.1 3.0 0.3 1.5

Manufacturing 16.4 33.2 24.8 16.0 19.6

Construction 7.0 5.3 8.4 2.9 5.8

Electricity, Gas and Water Supply 2.4 3.3 8.3 - 3.2


Personal and Household Goods12.9 23.4 15.2 25.5 18.7

Transportation, Storage & Communication 8.7 5.4 9.1 4.6 7.2

Financial Intermediation 5.8 6.4 6.8 - 4.0

Real Estate, Renting and Business Activities 6.9 11.1 8.4 17.1 11.2


Security23.9 - 0.1 - 7.3

Other Services 3.9 5.8 4.4 12.7 7.3

TOTAL 100.0 100.0 100.0 100.0 100.0

Compensation

of Employees

Taxes on

Production

excluding

Import

Duties

Operating

Surplus

Mixed

Income

Gross

Value

Added

Agriculture, Hunting, Forestry and Fishing 23.8 1.1 22.6 52.5 100.0 75.3

Mining and Quarrying 22.8 11.4 57.4 8.3 100.0 45.2

Manufacturing 25.7 9.2 35.8 29.4 100.0 26.2

Construction 36.7 4.9 40.7 17.7 100.0 44.6

Electricity, Gas and Water Supply 22.6 5.6 71.8 - 100.0 35.1


Personal and Household Goods21.1 6.8 23.0 49.1 100.0 71.4

Transportation, Storage & Communication 37.1 4.1 35.8 23.0 100.0 41.0

Financial Intermediation 43.8 8.6 47.6 - 100.0 62.7

Real Estate, Renting and Business Activities 18.8 5.4 21.0 54.8 100.0 62.4


Security99.5 - 0.5 - 100.0 70.3

Other Services 16.3 4.3 17.0 62.4 100.0 49.9

TOTAL 30.6 5.4 28.2 35.9 100.0 47.1

Percent to Value Added

Industry

Gross

Value

Added

Ratio

(GVA/GO)

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Table A-5. Gross Value Added and Incomes Generated, by Institution, in Percent


Table A-6. Incomes Generated as Percent of Value Added, by Institution


Institutional SectorCompensation

of Employees

Taxes on

Production

excluding

Import Duties

Operating

Surplus

Mixed

Income

Gross

Value

Added

Non-Financial

Corporations 67.0 75.1 82.0 0.0 47.6

Financial Corporations 5.8 6.4 6.8 0 4.0

Government 23.9 0.0 0.1 0 7.3

Households & NPISH 3.3 18.5 11.1 100 41.0

Total 100 100 100 100 100

Compensation

of Employees

Taxes on

Production

excluding

Import Duties

Operating

Surplus

Mixed

Income

Gross

Value

Added

Non-Financial

Corporations 43.0 8.5 48.5 0.0 100.0 37.3

Financial Corporations 43.8 8.6 47.6 0.0 100.0 62.7

Government 99.5 0.0 0.5 0.0 100.0 70.3

Households & NPISH 2.5 2.4 7.6 87.5 100.0 60.6

Total 30.6 5.4 28.2 35.9 100.0 47.1

Percent to Value AddedGross

Value

Added

Ratio

(GVA/GO)

Institutional Sector

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Table A-7. Sources and Uses of Incomes of Institutions


HOUSEHOLDS and NPISH In Billion Pesos % Share

Operating surplus, gross 249 3.4

Mixed income 2,862 39.5

Compensation of employees 2,668 36.9

Property income 408 5.6

Social security benefits 149 2.1

Other current transfers, received 902 12.5

TOTAL SOURCES 7,239 100.0

Household final consumption expenditure 6,340 87.6

Property expense 99 1.4

Taxes on income and wealth 140 1.9

Social security contributions 169 2.3

Other current transfers, paid 8 0.1

Saving, gross 483 6.7

TOTAL USES 7,239 100.0

Operating surplus, gross 1,843 80.6

Property income 369 16.2

Other current transfers, received 73 3.2TOTAL SOURCES 2,285 100.0

Property expense 814 35.6

Other current transfers, paid 35 1.5


Saving, gross 1,100 48.1TOTAL USES 2,285 100.0

Operating surplus, gross 153 24.5Property income 460 73.8Other current transfers, received 10 1.6

TOTAL SOURCES 623 100.0

Property expense 465 74.7Other current transfers, paid 47 7.6


Saving, gross 94 15.0TOTAL USES 623 100.0

Operating surplus 3 0.2

Taxes 1147 64.4

Other taxes on production and taxes on products 433 24.3

Import duties 222 12.5

Income taxes 493 27.6

NF Corporations 336

F Corporations 17

Households 140

Property income received 241 13.5

Social security contributions 169 9.5

Other current transfers received 221 12.4TOTAL SOURCES 1,782 100.0

Final consumption expenditure 831 46.6

Social security benefits 149 8.4

Other current transfers 324 18.2

Property income paid 300 16.8

Saving 178 10.0TOTAL USES 1,782 100.0

Imports of goods and services 2,958 91.2

Compensation of employees to ROW 0.0

Property and entepreneurial income to ROW 268 8.3

Other current transfers to ROW 16 0.5TOTAL SOURCES 3,242 100.0

Exports of goods and services 2,459 75.8

Compensation of employees from ROW 228 7.0

Property and entepreneurial income from ROW 70 2.2

Other current transfers from ROW 809 24.9

Net capital transfers paid 4 0.1

Net borrowing (328) -10.1TOTAL USES 3,242 100.0

NON-FINANCIAL INSTITUTIONS

FINANCIAL INSTITUTIONS

GENERAL GOVERNMENT

REST OF THE WORLD

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Table A-8. Sources and Uses of Funds: Net Financing (i.e. change in financial asset less change in liabilities), in Billion Pesos

NF

Corporations F

Corporations Central

bank Depository

Corporations

Insurance and

pension

Other financial

institutions Government Households and NPISHs

Total economy ROW

Sources of funds

Saving 1100 94 -46 79 17 44 178 483 1855

Capital transfers 0 0 0 0 0 0 4 0 4

Uses of funds

Gross capital formation 870 71 53 17 0 2 273 318 1532

Net financing 230 22 -99 62 17 42 -90 166 328 -328

Currency and deposits 313 -333 -558 -70 3 292 -34 208 153 -153

Debt securities 2 663 450 64 40 110 -135 -244 286 -286

Financial derivatives 7 8 0 8 0 0 -8 2 9 -9

Loans -178 161 25 109 7 21 -54 -156 -226 226

Equity and investment fund shares 18 -49 0 -35 12 -27 -8 42 3 -3

Insurance, pension and standardized guarantee schemes 0 5 0 0 5 0 0 -5 0 0

Other accounts receivable/payable 68 -433 -15 -14 -50 -354 149 158 -58 58

Unclassified items 0 0 0 0 0 0 0 162 162 -162 Note: Totals may not equal due to rounding.

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ANNEX A: Construction of the Philippines Financial Social Accounting Matrix 2010

The PFSAM 2010 provides an overview of the real and financial transactions in the economy. The main objective is to connect the multi-industrial relationships in production to the multi-sectoral distribution of income, consumption, investment in produced and non-produced assets and financial instruments, showing the interlinkages among the domestic institutions, and between these institutions with the Rest of the World (ROW).

The PFSAM 2010 was compiled based on the comprehensive conceptual and

accounting framework of the United Nations’ System of National Accounts, 2008 (2008 SNA). The output includes (1) the conventional SNA integrated institutional sector accounts (T-accounts), and (2) a comprehensive all-in-one large matrix that integrates separate modules of transaction matrices, or simply, the PFSAM. Annex A, Tables 1 and 2, respectively, show the condensed forms of the PFSAM and SNA for illustration purposes. Each account, which corresponds to a particular group of transactions in the SNA is presented in a matrix format and is referred to as a sub-matrix. The rule in compilation is to ensure as much as possible the equality between total uses (column sums) and total resources (row sums) for every account. The PFSAM has a built-in discrepancy checking mechanism to ensure the consistency of the system which integrates data from different sources.

I. Classifications of industries, institutions and financial instruments

The structure of the PFSAM 2010 made use of the following classifications:

A. Classification of industries and products

The number of industries and products were limited to the 11 major

industry/commodity groupings:

1. Agriculture, fishery and forestry 2. Mining and quarrying 3. Manufacturing 4. Construction 5. Electricity, gas and water 6. Trade and repair of motor vehicles 7. Transport, storage & communication 8. Financial Intermediation services 9. Real estate, renting & business activities 10. Public administration and defense: compulsory social security 11. Other community, social & personal services

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B. Classification of institutional sectors

The transactors for the sequence of accounts (SOA) covered nine institutional sectors/sub-sectors, which were aggregated into five major sectors. The ROW was treated as another sector transacting with the resident sectors.

1. Nonfinancial Corporations 2. Financial Corporations

2.1 Central Bank 2.2 Other Depository Corporations 2.3 Insurance and Pension Funds 2.4 Other Financial Corporations

3. General Government 3.1 National and Local Government 3.2 Social Security Agencies

4. Households and Non-Profit Institutions Serving Households (NPISHs) 5. ROW

C. Classification of financial instruments

Transactions in financial instruments were classified as follows:

1. Currency and deposits10 2. Debt securities 3. Financial derivatives 4. Loans 5. Equity and investment fund shares 6. Insurance, pension and standardized guarantee schemes 7. Other accounts receivable/payable 8. Unclassified items

The classification used for financial instruments was based on the

recommendations in the latest harmonized international statistical guidelines, namely, the 2008 SNA, the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6), the 2016 Monetary and Financial Statistics Manual and Compilation Guide (MFSMCG) and the 2014 Government Finance Statistics Manual (GFSM).

10

Includes Monetary Gold and Special Drawing Rights (SDR)

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II. Structure of the PFSAM 2010

The PFSAM 2010 is built around four major structural blocks of economic data which serve as tools for economic analyses. A. Supply and use tables (SUT)

The SUT shows the supply and uses of all goods and services in the economy. The supply table shows how the goods and services originate from the different domestic industries and imports from the ROW. The use table shows how those supply of goods and services are allocated as intermediate inputs of domestic industries and final uses for consumption, investment and exports. The balance between supply and use of goods and services at purchaser’s prices is shown in the following equation:

Output at Producer’s Prices + Imports + Import duties + Trade and Transport Margins = Intermediate Consumption + Exports + Final Consumption Expenditures + Gross Capital Formation

The SUT provides the basic structure for deriving more detailed input-output (I-O) table. B. Cross-classification matrix

The SUT by industry can only provide data on production and generation of income accounts. To generate the data for the rest of the SOA, the data (on output, intermediate consumption and value added) by industry have to be cross-classified under the same category by institutional sector. The cross-classification matrix provides a breakdown of production between incorporated and unincorporated enterprises, or between corporate and household informal sector production. Data from this matrix allows for the analysis of production and generation of income accounts by institutional sector in addition to employment, compensation of employees, and, thus, labor productivity, by institutional sector.

C. System of National Accounts (SNA) integrated institutional sector accounts

SNA institutional sector accounts is the fundamental feature recommended in the United Nations’ SNA since 1993 and continues to be a main feature of SNA 2008. Each sector’s transactions are presented as T-accounts, where the right hand side are RESOURCES and the left hand side are USES. The “Sequence of Accounts (SOA)” is discussed in Part III of Annex A. D. PFSAM 2010 as one comprehensive matrix

The PFSAM 2010 is the direct outcome of the SNA institutional sector accounts when arranged in matrix form without any additional data compilation required. The PFSAM 2010 did not show statistical discrepancies as the system

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requires that the sum total of each column must equal the sum total of each row. Having a row of discrepancies in the PFSAM facilitates the identification of weak estimates that need to be checked, as well as the basic data sources.

III. Sequence of Accounts (SOA)11 The fundamental identity that runs through the SNA is “that goods and

services produced in the economy must be consumed, used for capital formation or exported while all goods and services used within the economy must be produced in the economy or imported.”

This identity is implemented in the SNA as a sequence of interconnected flow

accounts for a particular economic activity such as production, generation of income, distribution and use of income. Each account shows the resources available to an institutional unit and the subsequent uses of these resources. In general, within each sector, and within each group of accounts, total resources must equal total uses. A residual balancing item shows the difference between the total resources and the total uses. The balancing item from one account is carried forward to the following account. For example, in the use of income account for households, gross saving is the balancing item between disposable income and final consumption expenditures to ensure that gross disposable income (GDI) = final consumption + gross saving. However, it may be noted that the balancing items are not introduced simply to ensure that the accounts balance. They are used as key macroeconomic indicators to assess economic performance.

In the PFSAM 2010, SNA institutional sector accounts are built around

nine (9) sectors (section I.B). Each institutional sector has separate but similar groups of accounts, where main economic aggregates such as gross value added (GVA), gross saving, gross capital formation, net lending are derived as balancing items.

The SOA in PFSAM 2010 include the following:

1. Production accounts are represented by the supply and use tables that are

cross-classified into institutional sectors. This account shows GVA as the balancing item, which is derived as a residual or the difference between output and intermediate consumption. The sum of these GVA for the total economy is the Gross Domestic Product (GDP)

2. Primary distribution of income consists of two sub-accounts:

a) generation of income account that shows from which industry or institutional sector the primary income originates; and

b) allocation of primary income account which shows the distribution of these primary incomes to the different institutions as owners of the factors of

11

United Nations, European Commission, International Monetary Fund, Organisation for Economic Cooperation and Development and World Bank (2009), System of National Accounts, 2008 (2008 SNA), New York.

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production (i.e., compensation of employees paid to households as owners of labor, and operating surplus retained or distributed as property income to owners of financial assets and natural resources that are used in production). The balancing item is the balance of primary income or the Gross National Income (GNI) of the whole economy.

3. Secondary distribution of income shows payments and receipts of current

transfers among institutional sectors. Current transfers include income taxes, social contribution benefits, non-life insurance premiums and claims, remittances of non-resident Filipinos, international assistance, among others. The balancing item is the GDI.

4. Use of disposable income account shows how households, government and NPISH allocate their disposable incomes between final consumption expenditures and gross saving, which is the balancing item. For the corporate sector, disposable income is equal to their saving.

5. Capital account shows the use of gross saving and net capital transfers for gross

capital formation. The balancing item is net lending/borrowing depending on whether the gross saving and net capital transfer is more/less than the sector’s requirements for capital formation.

6. Financial account shows how the net borrowing sectors finance their deficit by

incurring liabilities or reducing their assets and how the net lending sectors allocate their surpluses by acquiring financial assets or reducing their liabilities. It also shows the relative share of the various financial instruments in these transactions. In other words, financial account allows for analysis of portfolios held by institutional sectors.

7. ROW account shows the transactions of the ROW with the total domestic

economy. It is constructed from the point of view of the ROW, so that imports of the economy are viewed as resources of ROW and exports of the economy uses of ROW. This account is the mirror image of the Balance of Payments, which is produced from the point of the compiling economy.

In the above SOA of the integrated macroeconomic accounts, the link or a

source of fund for the subsequent account is the balancing item of the previous account. For example, the link between production account and primary distribution of income is the value added; the link between the primary distribution of income and the secondary distribution of income is the balance of primary income; the link between the secondary distribution of income and the use of income is disposable income; the link between the use of income and capital accounts is saving. Unlike in the previous accounts, the capital account’s balancing item, which is net lending/net borrowing is not a source of fund for the subsequent financial account, which also has net lending/net borrowing as its balancing item. The net lending/net borrowing in the financial account must equal that of the capital account.

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Overall, across all sectors, the system has to honor another balance of flows across all institutional sectors, which is also based on the equality between total uses and total resources, such as loans extended by all institutions including ROW must equal loans incurred by all institutions. These principles of equality allow data consistency checks and reduce discrepancies to the extent available data permit. It may be noted that there are no recorded statistical discrepancies in the PFSAM, as such, certain sectors/financial instruments deemed weak in terms of data support, absorb the discrepancy. Large discrepancies may signal that basic data need to be improved. This is also to underscore the importance of these statistical frameworks in identifying gaps/weakness in data production.

IV. Data sources

The data sources used in the construction of the PFSAM 2010 are as follows:

1. The supply-use tables (SUT) by institutional sectors were derived from the conventional SUT of industry by product. A cross-classification scheme, which was primarily based on the indicators derived from the special tabulation of the results of the 2010 Annual Survey of Philippine Business and Industries (ASPBI) of the Philippine Statistics Authority (PSA) were used to disaggregate the industry classification into corporate and unincorporated activities. The resulting SUT was cross-classified by institutional sectors with all the unincorporated activities lodged in the household and NPISH sector.

2. The ROW data were from the 2010 Balance of Payments (BOP) generated by the

BSP, which provided the control totals for the net lending and the ROW accounts.

3. The data block on allocation of primary account and secondary distribution of income account has some transactions based on available data and others were estimated given indicators on outstanding financial investments and liabilities.

4. The Capital and Financial Accounts were based on the revised 2010 Philippine

Flow of Funds (PFOF). The 2010 FOF was specially constructed for the production of the PFSAM 2010, using the SOA framework in the derivation of saving.12 Counterparty data, in particular from the government, financial sector, and BOP data sources, were used to estimate a part of the household and the non-financial sectors accounts.

12

The published 2010 FOF used a different methodology.

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U s e s

Resources

Annex A-Table 1. Condensed PFSAM2010 in matrix form, in billion pesos

CLASSIFICATION

ROW Activities / products

Primary income Sectors Sectors Sectors Sectors Financial

instruments Sectors Total

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

ROW (1)

Imports 2958 Compensation of

employees 0 Property

income 268 Current

transfers 16

Net capital transfers -4

Borrowing (financial liabilities)

896

4134

Products (2) Exports 2459 Intermediate consumption

8954

Final consumption

7184

Investment in fixed assets (GCF) 1517

20114

Primary income (3)

Compensation of employees

228

Value added 8203

8431

Sectors (4) Property

income 70

Primary income receivable from

production 8431

Property income

transactions among sectors

-199

8302

Sectors (5) Current

transfers 809 GNI 8233

Current transfers 793

9835

Sectors (6)

GDI 9026

9026

Sectors (7)

Saving 1842

Net capital

transfers 4

Borrowing (financial liabilities)

2679

4525

Sectors (8)

Net lending/ borrowing 329/(328)

329

Financial instruments (8) Investment in

financial assets 568

Investment in financial assets

3007

3575

TOTAL (9) 4134 20115 8431 8302 9835 9026 4524 328 3575

Total Uses = Total Resources, any difference is due to rounding

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Annex A-Table 2. Condensed PFSAM2010 in SNA T-accounts, in billion pesos

Total economy

Rest of the world

Balances of total uses and total resources

U R U R U R

Total supply and use of goods and services 17,434 16,936 2,459 2,958 19,893 19,894

External balance of goods & services

1 Imports f.o.b. 2,958

2 Exports f.o.b. 2,459

3 External balance of goods & services 499

PRODUCTION ACCOUNTS

4 Output/goods and services 16,936 5 Intermediate consumption 8,954

6 GVA/GDP 7,981

GENERATION AND ALLOCATION OF PRIMARY INCOME ACCOUNTS

7 Primary income 8,203 8,431 228 8,431 8,431

8 Property income 1,677 1,478 70 268 1,747 1,747

9 GNI 8,233

SECONDARY DISTRIBUTION OF INCOME ACCOUNTS

10 Current transfers 1,226 2,019 809 16 2,034 2,034

11 GDI 9,026 -

12 USE OF INCOME ACCOUNTS

13 Final consumption expenditure 7,184

14 GROSS SAVING 1,842

15 CAPITAL ACCOUNTS

16 Gross capital formation 1,517

17 Net capital transfers 4 4 4 4

18 NET LENDING 328 (328)

19 FINANCIAL ACCOUNTS

20 Net acquisition of financial assets/liabilities 3,007 2,679 568 896

21 NET LENDING 328 (328)

Note: U - Uses R - Resources

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