Strengthening Regional Capacities for Statistical
Development in Southeast Asia Project
Sponsored by UNSD, ESCAP and ASEAN Secretariat
Bangkok, 6-10 August 2001
ESTIMATION OF THE QUARTERLY GROSS VALUE ADDED OF
MANUFACTURING IN THE PHILIPPINE SYSTEM OF NATIONAL
ACCOUNTS
BY
MINERVA D. MARTIN
WORKSHOP ON THE DEVELOPMENT OF ASEAN SHORT-TERM INDICATORS
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ESTIMATION OF THE QUARTERLY GROSS VALUE ADDED OF
MANUFACTURING IN THE PHILIPPINE SYSTEM OF NATIONAL ACCOUNTS 1
BY
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MINERVA D. MARTIN
I. INTRODUCTION
The manufacturing sector contributes about 25% to the Gross Domestic
Product (GDP) of the Philippines. With this share, together with its impact on
employment and on foreign trade, the sector plays an important role in the overall
performance of the economy.
This paper presents the methodology used by the National Statistical
Coordination Board (NSCB) for estimating the quarterly Gross Value Added (GVA) of
the manufacturing sector in the Philippines, including the data sources. The
importance of the Index of Industrial Production, how it is incorporated and the extent
to which the quarterly manufacturing GVA is dependent upon administrative records
data are also discussed.
In the Philippine System of National Accounts (PSNA), manufacturing is one
of the components of the Industry sector together with Mining and Quarrying,
Construction and Electricity, Gas and Water or the Utilities sector. In constant 1985
prices, its 2000 levels comprised about 72 per cent of the country’s industry sector,
25 per cent of the Gross Domestic Product (GDP) and 23 per cent of the Gross
National Product (GNP). The sector employs about 10 per cent of the total workforce
and contributes about 96 per cent to merchandise exports. In 2000, the five biggest
subsectors of manufacturing were food (36%), products of petroleum and coal
(17%), electrical machinery (12%), chemical and chemical products (6%) and
footwear and wearing apparel (5%).
At present, the National Statistical Coordination Board (NSCB) releases the
national accounts on a quarterly, semestral and annual basis. Quarterly estimates
1
A paper presented at the Workshop on ASEAN Short-Term Indicators in Bangkok, Thailand, 6-10 August
2001
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Statistical Coordination Officer V, NSCB
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are released two (2) months after the reference quarter, while annual estimates are
released on the last week of January immediately following the reference year.
II. COMPILATION OF QUARTERLY GVA IN MANUFACTURING
Manufacturing is defined as the mechanical or chemical transformation of
inorganic or organic materials into new products, whether done by machine or by
hand, in factories or in households, for sale or for own consumption. It includes
assembly of component parts (semi-manufactured goods) in factories; assembly and
installation of machinery and equipment in the establishments; repair of machinery
and equipment belonging to producers on a contract basis. For the national
accounts compilation, manufacturing is divided into 20 major groups, namely:
1. Food Manufacturing
2. Beverage Industries
3. Tobacco Manufactures
4. Textile Manufacturing
5. Footwear & Wearing Apparel
6. Wood & Wood Products
7. Furniture & Fixtures
8. Paper & Paper Products
9. Publishing & Printing
10. Leather & Leather Products
11. Rubber Products
12. Chemicals & Chemical Products
13. Products of Petroleum & Coal
14. Non-Metallic Mineral Products
15. Basic Metal Industries
16. Metal Products
17. Machinery except Electrical
18. Electrical Machinery
19. Transport Equipment
20. Miscellaneous Manufacturing
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Five of these major groups, namely: Food, Chemicals and Chemical Products,
Non-Metallic Mineral Products, Basic Metals and Electrical Machinery, are further
disaggregated into their various components.
Food manufacturing has ten subsectors, composed of Bakery products,
Coconut products, Milk and dairy products, Grain Mill products, Processed Meat and
Fish, Processed Fruits and Vegetables, Milled and Refined Sugar,
Vegetables/Animal Oils and Fats, Animal Feeds and Miscellaneous Food. Chemicals
and Chemical Products has seven subsectors, namely: Basic Industrial Chemicals
and Industrial Gases, Drugs and Medicines, Fertilizers, Paints, Plastic, Cosmetics
and Toilet Preparations and Miscellaneous Chemicals. Non-Metallic Mineral
Products has three subsectors, namely: Cement, Glass and Glass Products and
Miscellaneous Non-Metallic Mineral Products which includes manufacture of pottery,
china and earthenware and manufacture of structural concrete products. Basic Metal
Industries has two subsectors: Iron and Steel and Non-Ferrous Metals, which include
copper cathodes delivered to the Philippine Associated Smelting and Refining
Corporation (PASAR). Electrical Machinery has five subsectors composed of the
Manufacture of Electrical Appliances, Electrical Lamps and Fixtures, Batteries,
Electrical Wire and Wiring Products and Microcircuits.
III. SOURCES OF DATA
The censuses, surveys and administrative data of the following government
offices and private institutions are the main sources of data in the estimation of the
Quarterly GVA of Manufacturing.
1. The censuses and surveys of the National Statistics Office (NSO) are
the main sources of data:
a. The Monthly Integrated Survey of Selected Industries
(MISSI) provides flash indicators for the manufacturing sector.
The survey focuses only on the top manufacturing enterprises
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and estimates are made on the assumption that the trend of
these large enterprises dictate the movement of the industry.
b. The Quarterly Survey of Philippine Business and Industries
(QSPBI) provides trends and seasonal patterns of economic
indicators through three key indicators, gross revenue,
employment and compensation.
c. The Integrated Survey of Households (ISH) generates
employment data on a quarterly basis.
d. The Wholesale Price Index (WPI) provides monthly Metro
Manila Prices by subgroup of Manufacturing. It is used as
deflator in estimating the quarterly and annual GVA at constant
prices.
2. Administrative Data:
2.1. The Department of Energy (DoE) provides monthly data on
Petroleum Refinery production as well as monthly prices of
Petroleum products.
2.2. The Philippine Cement Manufacturers Corporation
(PHILCEMCOR) provides monthly data on cement production.
2.2. The Sugar Regulatory Administration (SRA) provides data on
raw sugar production and prices.
2.4. The Philippine Associated Smelting and Refining
Corporation (PASAR) provides data on copper refining from
the different mining companies.
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IV. ESTIMATION METHODOLOGY:
A. Current Price Estimation:
For the initial quarterly estimate (1981), annual GVA in manufacturing
was disaggregated into four quarters by applying the gross index of
production computed from the then QSE (QSPBI) and SKEM (MISSI). This
procedure is shown in the following equation:
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GVAt = GVA81 * GPIt / GPI t
t 1
Where:
GVAt = gross value added for quarter t
GVA81 = 1981 annual gross value added
GPIt = gross production index for quarter t
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GPI t = total gross production index for quarter t
t 1
Estimates of GVA for subsequent quarters were derived by
extrapolation based on production trends from QSPBI and MISSI. Preliminary
and revised estimates utilize more updated data from the same surveys to
extrapolate for the quarter. (Table 1)
Thus:
GVAqt = GVAqt-1 * (Xqt / Xq t-1)
Where:
GVAqt = gross value added at quarter q of year t
GVAqt-1 = gross value added at quarter q of the preceding year
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Xqt = production at quarter q of year t
Xq t-1 = production at quarter q of the preceding year
Table 1: AT CURRENT PRICES
MISSI VALUE OF PRODUCTION
Q12001/Q12000
Sub-sectors Q12001/Q12000 1994 CE Weights Weighted
Growth
Food Manufacturing 1.10045 1.00000 1.10078
Bakery Products 1.01383 0.08390 0.08506
Coconut Products 0.61327 0.00980 0.00601
Milk and Dairy Products 1.18155 0.10730 0.12678
Grain Mill Products 1.36127 0.10200 0.13885
Processed Meat 0.90712 0.14470 0.13126
Processed Fruits 1.04053 0.06070 0.06316
Milled and Refined Sugar 1.32698 0.14530 0.19281
Vegetables Oil and Fats 0.92688 0.11830 0.10965
Animal Feeds 1.15870 0.08450 0.09791
Miscellaneous Food 1.03816 0.14350 0.14929
V. CONSTANT PRICE ESTIMATION
To derive the estimate at constant prices, estimates at GVA at current prices
undergo a process of single deflation utilizing appropriate output price indices to
remove the effects of price changes. These indices are derived from the wholesale
prices of manufactured commodities available at the National Statistics Office (NSO).
The deflator is computed by getting the weighted growth of the current quarter WPI
over the same quarter of previous year’s WPI and multiplying the result by the
Implicit Price Index of the same quarter of the previous year. (Table 2 & 3)
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Table 2: AT CONSTANT PRICES
WHOLESALE PRICE INDEX (WPI)
Q12001/Q12000
Sub-sectors Q12001/Q12000 1994 CE Weights Weighted
Growth
Food Manufacturing 1.07994 1.00000 1.08026
Bakery Products 1.00965 0.08390 0.08471
Coconut Products 0.84082 0.00980 0.00824
Milk and Dairy Products 1.11668 0.10730 0.11982
Grain Mill Products 1.00971 0.10200 0.10299
Processed Meat 1.27474 0.14470 0.18445
Processed Fruits 0.93740 0.06070 0.05690
Milled and Refined Sugar 1.27515 0.14530 0.18528
Vegetables Oil and Fats 0.91598 0.11830 0.10836
Animal Feeds 1.05562 0.08450 0.08920
Miscellaneous Food 0.97573 0.14350 0.14031
Table 3: First Quarter 2001 Estimation of Food Manufacturing
AT CURRENT PRICES
Published Food Mfg. Q1 2000 at Current Prices 77,933
1.10078
Multiplied by the Weighted Growth of MISSI
85,787
Estimated Food Mfg. Q1 2000 at Current Prices
DEFLATOR
Published Food Mfg. Q1 2000 Implicit Price Index 370.88
Multiplied by the Weighted Growth of WPI 1.08026
Estimated Food Mfg. Q1 2001 Deflator 400.65
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AT CONSTANT PRICES
Published Food Mfg. Q1 2000 at Current Prices
Estimated Food Mfg. Q1 2000 at Current Prices 85,787
Divide by the Estimated Deflator 4.00658
Estimated Food Mfg. Q1 2001 at Constant Prices 21,412
VI. PROBLEMS AND ISSUES:
1. Low response rate during quarterly estimation.
Sectors specialists resort to look up for other relevant indicators
such as newspaper clippings, press releases on the performance of
their products from companies which are included in the surveys of the
NSO, telephone calls to the companies and enterprises inquiring on
their quarters’ performance.
2. Inconsistent data being reported in the surveys and those with press
releases of enterprises or firms.
3. Existing price data do not cover all commodities.
There are no available prices for microcircuits (use for computers)
considering that microcircuits accounts for 70% of the total electrical
machinery. Substitute prices of radio, television and communication
equipment are used.
4. Appropriateness of using output and input price deflators for estimating
constant GVA.
Conceptually, constant GVA is equal to the difference between
output at constant prices and intermediate inputs at constant
prices, which is derived through the process of double deflation.
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Presently, however, due to data limitations
Manufacturing, together with other sectors, follow the single
deflation technique where GVA at current prices is deflated
using output deflators. This is on the assumption that prices of
output and prices of inputs move in a parallel trend which is not
necessarily the case.
5. Proper price deflator
Manufacturing sector continues to use the WPI as proxy deflator
for the PPI.
VII. FUTURE PLANS
1. Rebasing to 2000
2. Improvement of the coverage to estimate for the subgroups of other
manufacturing sub-sectors up to the 4-digit level of the Philippine
Standard Industrial Classification (PSIC).
3. Conduct of study to improve the current methodology to incorporate
changes in the statistical system.
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