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Gross Domestic Product (GDP) and Gross National Income (GNI) are core statistics in National Accounts. They are both important economic indicators and useful for analysing the overall economic situation of an economy, with the former particularly useful for reflecting the level of production, and the latter for aggregate income of residents.
The compilation framework of GDP and GNI accords essentially with the international standards as stipulated in the System of National Accounts 2008 (2008 SNA). Statistics on GDP are compiled as from the reference year of 1961 while those on GNI as from the reference year of 1993.
In Hong Kong, the first released GDP statistics in respect of a period are called “preliminary figures”. When more data become available, the preliminary figures will be revised. This routine revision is in accordance with the international practice to compile and release GDP figures at the earliest possible time by using only partial data. All those figures published subsequently, on revision, are called “revised figures”. In general, the figures are finalised when data from all regular sources are incorporated.
In addition to this, it is an established practice of the Census and Statistics Department to undertake non-routine technical revision exercises from time to time to enhance the quality of Hong Kong's GDP statistics by incorporating new data sources, improved estimation methods, and changes in international standards, definitions and classifications where applicable, which are results of continuous research and development on the GDP compilation framework. This is in line with the international practice to improve the quality and reliability of GDP statistics on a continuous basis. In a non-routine revision exercise, the entire series of GDP and its components may be subject to revision in accordance with the scope of the exercise concerned.
GDP is a measure of the total value of production of all resident producing units of an economy in a specific period (typically a year or a quarter), before deducting the consumption of fixed capital.
Per capita GDP of an economy is obtained by dividing the total GDP in a year by the population of that economy in the same year.
GDP can be measured using different approaches. For Hong Kong, GDP is compiled using the "expenditure approach" and the "production approach".
GDP by expenditure component
(1) Private consumption expenditure :
Compiled from a wide range of data sources, private consumption expenditure is a comprehensive measure of household overall spending on consumption goods (purchased from various channels including the conventional retail outlets) and services purchased locally or outside Hong Kong.
PCE is distinguished from retail sales statistics in that:
(2) Government consumption expenditure :
GDP by expenditure component at current market prices and in volume terms are compiled.
Conceptually, changes over time in the GDP at current prices can be factored into two components, reflecting (i) changes in the prices of goods and services produced or purchased, and (ii) changes in their volumes. In order to measure the volume growth of GDP and its components, the effect of price changes has to be eliminated. The year-on-year change in the volume measure of GDP gives a measure of the "real" growth of an economy.
The rate of change in the implicit price deflator of GDP (or GDP deflator in short) can be used as a broad measure of overall inflation in an economy. It takes account of all price changes relating to consumption, investment, exports and imports.
To compile the volume measures of GDP and its components, the annually re-weighted chain linking approach is adopted. For a particular year, the volume estimates of major components of GDP revalued at preceding year prices are first derived by "deflating" the current price values of sub-components by the relevant price indices (or in some cases by revaluing the current period quantities at preceding year prices) at the most disaggregated levels. The volume estimate of GDP is then obtained by aggregating the volume estimates of GDP major components revalued at preceding year prices. With the effect of price changes eliminated, the volume estimate reflects the real growth of GDP. The preceding-year weighted volume measures of GDP and its components are chain linked to a selected reference year in order to obtain a continuous time series of the chain volume measures of GDP and its components.
The implicit price deflators of GDP and its expenditure components are obtained by dividing the respective current price values by the corresponding volume measures and then multiplying by 100. Hence as it stands, the implicit price deflators of GDP and its expenditure components are not used as inputs for compiling the corresponding volume measures.
In the seasonally adjusted GDP series, since seasonal effects have been removed statistically, figures for consecutive quarters can be compared more meaningfully. When the year-on-year changes for the quarterly figures in the original GDP series and the quarter-to-quarter changes for the quarterly figures in the seasonally adjusted GDP series are analysed together, the trend of the GDP can be more clearly discerned.
Seasonal adjustment of GDP and its components is performed using the X-12 ARIMA method which is a standard method used for removing seasonal effects from data series statistically. Seasonally adjusted series may be revised as more data become available.
Gross Domestic Product (GDP) by economic activity
GDP compiled by the expenditure approach is selected as the single measure of GDP. In presenting GDP by economic activity at current prices, the sum of value added of respective economic activities at basic price plus taxes on products plus statistical discrepancy is equal to GDP by expenditure component. Statistical discrepancy refers to the difference in values of current price GDP compiled using the expenditure and production approaches, as a result of the adoption of different data sources and estimation methods in the compilation processes.
GDP by economic activity at current prices and in volume terms are compiled. The annual series at current prices and quarterly series in volume terms can be traced back to 1980 and the first quarter of 2000 respectively.
Statistics on GDP by economic activity are compiled by adopting the Hong Kong Standard Industrial Classification (HSIC) Version 2.0 in classifying economic activities. The valuation of value added is at basic prices. Value added at basic prices is defined as the value of gross output at basic prices less intermediate consumption valued at purchasers’ prices. Basic price is the amount receivable by a producer for a unit of good or service provided, which excludes any taxes on the products concerned, but includes subsidies on the products. Value added at basic prices can better reflect the prices actually paid and received by producers.
GDP by economic activity provides data to support sectoral analyses from various perspectives. First, annual current price GDP by economic activity provides data for analysing the longer-term trend in the relative importance of various economic sectors. This helps depict changes in the underlying economic structure. Second, the year-on-year percentage change of volume measures of GDP by economic activity provides data for assessing the relative performance of different economic sectors. Third, volume measures of GDP by economic activity provide data for analysing the contribution of different economic sectors to overall economic growth. This facilitates analysis of the source of growth of an economy.
Economic activities covered by GDP by economic activity are as follows : agriculture, fishing, mining and quarrying; manufacturing; electricity, gas and water supply, and waste management; construction; import and export, wholesale and retail trades, accommodation and food services; transportation, storage, postal and courier services; information and communications; financing and insurance; real estate, professional and business services; and public administration, social and personal services. Under the framework of national accounts, an additional activity entitled ownership of premises is also covered.
Ownership of premises is treated as an economic activity in national accounts. This activity covers (a) the leasing services assumed to be provided by residential owner-occupiers to themselves; and (b) the leasing services provided to tenants by owners of premises in individual capacity.
Gross National Income
GNI is computed as follows:
Per capita GNI of an economy is obtained by dividing GNI in a year by the population of that economy in the same year.
Primary income comprises investment income and compensation of employees (CE). Investment income includes direct investment income (DII), portfolio investment income (PII) and other investment income (OII) as well as income on reserve assets (RA).
DII refers to earnings of residents of an economy from their direct investment outside the economic territory of the economy, and earnings of non-residents from their direct investment within the economic territory, in which direct investors acquire a lasting interest and a significant degree of influence or an effective voice in the management of the enterprises concerned. These earnings are in the form of receipts of distributed dividends, share of undistributed profits, net interest receipts from inter-company debts and gross rentals.
References on Concepts and Methods
Glossary of Terms