GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY. 2. AGENCY: Department of Statistics, Clarence Bain Building, P O Box N-3904, Nassau, Bahamas

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1 BAHAMAS: NATIONAL ACCOUNTS METHODOLOGY GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY SECTION 1: GENERAL INFORMATION 1. COUNTRY: Bahamas 2. AGENCY: Department of Statistics, Clarence Bain Building, P O Box N-3904, Nassau, Bahamas 3. CONTACT PERSON: Officer in charge, National Accounts 4. TEL, FAX, E MAIL: ; ; dpsdp@bartelnet.bs 5. DATE OF MOST RECENT ESTIMATES: OTHER FEATURES OF THE SYSTEM CURRENTLY COMPILED: Expenditure on the GDP 7. REQUENCY OF DISSEMINATION: MODE OF DISSEMINATION: DATE OF MOST RECENT PUBLICATION/DATA DISSEMINATED: SECTION 11 : STANDARD INTERNATIONAL GUIDELINES FRAMEWORK AND CLASSIFICATION 1. The framework of reference is the revised UNSNA Modifications/deviations are: Gross Capital Formation is composed of Change in Stocks and Gross Fixed Capital Formation. The latter is composed of Residential Building Construction, Other Construction, and Machinery and Equipment. It might be noted here that this is the only instance of departure from UN terminology. However, it was considered that the term Change in Stocks was more neutral and meaningful than "Increase in Stocks". The term "Other Construction" was used because the UN distinction between "non- residential buildings" and "other construction and land improvements" cannot be made.

2 Finally the term Machinery and Equipment was considered more meaningful than the U.N term "other". 3. The Classification system used in the computations is the ISIC Rev 3 from 1990 onwards. The list is appended Modifications to the Classification System is as follows: For the Government Sector, all administrative units are not included in general administration (government). The administrative activities for Education and Health are included in the industries Education and Health. 5. The level of disaggregation for the availability of data is at the most aggregate or tabulation category level, in a few instances e.g. wholesale and retail trade, finer levels can be published Activities are coded at the level of Implementation of the CPC SCOPE AND COVERAGE 1. The scope and coverage are indicated as follows: 1.1 Geographic coverage Unit coverage Transaction coverage Imputations for unrecorded activity include VALUATION Both the Production Account and the Expenditure Account are valued at market prices

3 SECTION 111: SOURCES AND METHODS OF COMPILATION GROSS DOMESTIC PRODUCT BY INDUSTRY AGRICULTURE Agriculture includes (i) the growing of crops (ii) the rearing of poultry and livestock (iii) Fishing. There is no hunting or forestry industry. Sources of data The main sources of data are (i) Department of Agriculture. An Agricultural census was conducted in 1993/1994 and quantities and values from 1989 have been based on the census data; (ii) The Department of Fisheries; and (iii) the Department of Statistics which conducts the annual survey of business establishment. Methods of estimation Current Prices: Output of farmers is estimated by type of vegetables and fruits produced on the basis of deliveries to packing houses as well as commercial wholesalers. The output of eggs, poultry and other meat products is based on reports from the large commercial producers and government abattoirs. Quantities exported are also obtained from the Department. The cost of inputs is estimated at 34.3% of gross output. An estimate of 10% was used for subsistence farming. (percentages given by the Department of Agriculture) Fishing: The quantity and value of fish landed was accessed from the Dept of Fisheries. The Industry also includes a number of fish and /or seafood farming establishments. This industry is called Mariculture and is carried out on a small scale. Output and input information were obtained from Establishment Surveys. Value of landings as reported to fish houses and other commercial establishments was obtained from the source indicated. Output was increased by 50%, 25% to represent nonreported catches and 25% to represent subsistence fishing. No input data were available so an arbitrary input ratio of 30% of overall gross output was used. Mariculture: This activity includes a number of fish and/or seafood farming establishments. The main source of information was establishment surveys.

4 Constant Prices: Agricultural Crops: The average producer prices per pound of each crop in 1991 was applied to the respective quantities for the various years. Poultry: Similarly, the value of output of slaughtered broilers for each year is obtained by applying average producer price in 1991 to quantities. The same procedure is done for eggs, the value of output at 1991 prices is derived by applying quantity collected to the average producer price per dozen in The sum of broilers and eggs give the total for poultry. Livestock: The value of output of each type of animal at 1991 prices is found by multiplying the total weight of each animal by its corresponding average producer prices in The value of output of dairy is calculated by applying the average producer price per gallon in 1991 to total quantity produced. Fishing: The same procedure was applied for Fishing that is the 1991 average price per pound per product was applied to the quantity landed. Mariculture: Gross output at current prices is deflated by the implicit price index of gross output from fishery product. The input/output ratio for the year 1991 has been applied to the value of gross output at 1991 prices to estimate intermediate consumption at 1991 prices for the relevant period. MINING AND QUARRYING Source of Data: Establishment Survey Method of estimation: Current prices: The valuation of output from these economic activities is normally done at pit-head prices. The pit-head price represents the value of the commodity/good per unit of quantity in the state in which it is extracted from the earth or sea, together with such processing which is usually carried out by the establishment before marketing. Constant prices: A combined Laspeyres Price Index of Aragonite and Solar Salt was used to deflate the total value of output from Mining & Quarrying at current producer prices. Combined, these two products represent 71.8% of overall output in The intermediate consumption at 1991 prices was calculated by applying the input/output ratio for 1991 to the value of output at 1991 prices for each year. Depreciation at 1991 prices is derived by using the depreciation/gross value added ratio at current prices of each year by the gross value added at 1991 prices for each year.

5 MANUFACTURING Source of data: The main source of data is the Establishment Survey Method of Estimation Current prices: Information is obtained at the four digit level of ISIC Rev 3. These are then converted to three digit level. This includes the value of main products, by- products and services rendered to other establishments. The total output is obtained by first summing all the values of output at the four digit level of ISIC before conversion to three digits. The commodity taxes / excise duties are indirect taxes levied by the Government on locally manufactured goods. All import duties waived by the Government under the various Encouragement Acts are treated as subsidies, Constant Prices: Three methods have been employed to derive constant price estimates, and are described as follows: (i) Laspeyres Producer Price Index for ISIC codes at the four digit level are calculated where data are available for quantity of goods sold and the equivalent value of sales. These index numbers are used to deflate the value of output at current producers prices to obtain the value of output at producer prices for the respective ISIC codes at the four digit level. This method was used for establishments in 1541, 1551 and 1554 where data on the quantity of goods sold and the corresponding value of sales have been provided at the four digit level. In the case where the data were not supplied, the combined Laspeyres Producer Price Index/Implicit Deflators derived from the establishments which supplied the data were used. (ii) The second method is the construction of an Index of the number of persons employed at the four digit level of ISIC with 1991 as the base year. This index was used to extrapolate the 1991 estimate of output for the relevant ISIC codes at the four digit level to generate the value of output at 1991 Producer Prices. (iii) The third method is the utilization of Implicit Deflators (1991=100) derived from the output at current and constant producer prices at the four digit level. This implicit deflator is used to deflate the value of output of goods produced at current prices for: (a) establishments in the ISIC codes at the four digit level which responded to the Establishment Survey in 1989 and 1990 but closed down in 1991 (b) new establishments which responded to the surveys after 1991 and (c) establishments in the various ISIC codes which did not provide data on the quantities of goods produced and sold The intermediate consumption at 1991 prices was calculated using input/output ratio for 1991 multiplied by the value of output at 1991 prices for each year. The depreciation at

6 1991 prices is calculated using the depreciation/gross value added ratio at current prices of each year by the gross value added at 1991 prices for each year. The commodity taxes and subsidies are deflated by the implicit deflator for indirect taxes with 1991 as the base. ELECTRICITY AND WATER Source of data: Establishment Surveys, Bahamas Electricity Corporation and the Water and Sewerage Corporation annual financial reports. Method of Estimation Current Prices: gross output is the sum of water and electricity sold and services rendered. Constant Prices: These items were deflated by the Laspeyres Price Index, which included unit values/prices of the good sold by major producers. The Intermediate consumption and Depreciation at 1991 prices were calculated as previously described. CONSTRUCTION Source of data: Establishment Surveys and the Central Bank. Method of Estimation: It was acknowledged that the results of the establishment survey on the value of income generated (or value added) by housing construction and the total value of housing construction must be expanded to include persons who do their own contracting. It is assumed that people who construct their own houses would employ 50% of the sub- contracting trades reported as expenditure by general construction in the establishment survey. These sub-contractors may not be covered by the establishment survey. It is further assumed that the payment by general contractors to these sub trades is for labour only. The value added in construction is therefore increased by the above proportion of value of the sub trades hired by general contractors. On the expenditure side, the value of construction includes the insurance fees, architect's fees and interest paid. On both the production and expenditure side, an estimate is made for the Family Islands Residential Construction, based on the Family Island's percentage of the number of Building Permits approved. Construction Services imported, prepared by the Central Bank for the Balance of Payments, are also included. From 1993, this figure has become significant since major renovations and construction of hotels is being undertaken. Intermediate Consumption, Depreciation, Wages and Salaries are calculated based on the relationship to Gross Output as compiled from the Establishment survey. These percentages are also applied to the Construction Services Imported Total sourced from the Central Bank.

7 The overall estimates are reviewed for consistency by comparing the current performance of the industry in relation to 1989 and 1990 and by looking at the value of certain imported items used in the industry. Constant Prices: The value of gross output at current prices for each year has been deflated by the fixed weighted price index of construction for the USA. This index was used because Bahamas does not have a useable construction index and imports most construction materials and some labour from the USA. The fixed weighted price index was rebased from 1992 to 1991 for conformity. The Intermediate consumption and Depreciation at 1991 prices were calculated as previously described. DISTRIBUTIVE TRADES The Industry includes Wholesale and Retail trade Source of Information: Establishments Surveys and Tourism surveys. Method of Estimation Current prices: The gross output is the sales at selling prices minus the cost of goods sold plus other revenues/incomes generated by the establishment. It was noted that the straw market, a part of Retail Trade, was not covered in the Establishment Survey. Estimates of income were therefore based on expenditures by tourists on straw products which were sourced from Tourists Surveys. This expenditure was regarded as one third of the sales of straw vendors. From 1995 however, when this figure was lumped into a category called Handicrafts and Other items, a percentage was applied based on previous years to extract the straw market gross output. The Gross Output is found by applying 1.25% to the Tourism expenditure figure. The cost structure of the Retail Trade Gross Output is applied to the straw market Gross Output figure. Constant Prices. The volume index of commodity imports was applied to total sales from Wholesale and Retail Trade at 1991 market prices to arrive at constant price estimates. This index is computed by taking the import of goods at constant prices (which is the current price divided by the USA Laspeyres Import price index minus - all items USA export price index ) for each year divided by the 1991 figure. The USA index is used since a significant value of goods which enter the wholesale and retail trade are imported into the Bahamas. The cost of sales at 1991 prices is calculated by finding the ratio of costs of sales to Sales, then applying the ratio to the estimated sales at 1991 prices. Intermediate costs and Depreciation at 1991 prices were calculated as previously described. HOTELS AND GUEST HOUSES Source of data: Establishment surveys and Government Treasury Accounts.

8 Method of estimation Current Prices: The gross output is the sales at selling prices minus the cost of goods sold plus other revenues generated by the establishment. Indirect taxes are taken from the treasury accounts, which record Hotel Occupancy tax as 4% of room sales. The subsidies given under the Hotel Encouragement Act are basically refunds of import duties levied by the Government. Constant prices: The sales at 1991 prices are calculated by multiplying the overall sales by the Index of the number of visitor nights (number of stop over visitors x average length of stay) The cost of sales and depreciation at 1991 prices were computed as previously described. The indirect taxes (hotel occupancy tax) at 1991 prices are extrapolated using the index of visitor nights. Subsidies have been deflated by the implicit deflator of overall indirect taxes with base TRANSPORT, STORAGE AND COMMUNICATION Source of information: Establishment surveys, Road traffic Dept., The Bahamas Handbook and Paradise Island Bridge Authority. Method of estimation: Transport Land transport: includes jitneys, taxis, trucking, car rentals, tour buses and Paradise Island Bridge tolls. The revenue/sales of the annual surveys of taxis, jitneys and trucking had to be estimated due to poor response. The product of average revenue /sales by island by the number of registered vehicles gives gross output. An adjustment is made in the case of jitneys that are not used for commercial purposes, this is assumed to be 50%. Data received for car rentals, tour operators/buses, marine and air transportation were adequate for the calculation of value added. Constant prices: Land transport is deflated using: (i) NP RPI # for jitney fares for Jitneys and trucking (ii) NP RPI numbers for Taxi fares and car rentals (rebased) (iii) number of tourist days for tour operators/buses (iv) price index of numbers for bridge tolls. Marine transport is deflated by index numbers of cargo landed at Nassau Harbour. Air transport is deflated by index numbers of passenger miles run by Bahamasair. Intermediate consumption and Depreciation at 1991 prices are calculated as previously described. Storage Source of information: Establishments Surveys Current prices: the gross output is the sum of rental revenue and other revenue/income

9 Constant prices: index numbers of number of persons engaged in this activity are used to deflate gross output. Communications Source of information: Government Treasury reports (Post Office), Establishments Surveys (which includes such establishments as Bahamas Telecommunications Corporation (public corp.), the courier services and Cable Bahamas. Method of Estimation Current Prices: The gross output, intermediate consumption and depreciation are calculated following the normal production approach Constant prices: The combined estimates of the value of gross output from Batelco and the Post Office constituted more than 90% of the overall value of gross output of the activity of Communications at current market prices. Information on the number of chargeable minutes of conversation (both national and international) is obtained and is used to construct index numbers of chargeable minutes of conversation with 1991 as base. The index numbers are used to extrapolate the value of gross output at 1991 prices. The Post Office provided data on number of articles delivered locally in the Bahamas which are used similarly. To arrive at the estimates of total value of gross output at 1991 prices for communications, the sum of the value of gross output for Bartelco and the Post Office is divided by the corresponding share of each for the appropriate periods. FINANCE, REAL ESTATE, RENTING AND BUSINESS ACTIVITIES Banking Source of information: Reports of the Central Bank of Bahamas, Bahamas Development Bank and Bahamas Mortgage Corporation. Method of estimation The value of gross output is taken to be the sum of actual service charge and imputed service charges. Imputed service charges are estimated by deducting interest paid to depositors from the investment income. The financial intermediation services indirectly imputed is found from Interest Income minus Interest expense. Actual service charges include fee income and rental income. Intermediate consumption items are easily extracted. Constant prices: The value of gross output at 1991 market prices is extrapolated using an index of the number of deposit accounts in the Bahamas.

10 The intermediate consumption at 1991 prices was calculated using input/output ratio for 1991 multiplied by the value of output at 1991 prices for each year. Depreciation at 1991 prices was calculated using the depreciation/gross value added ratio at current prices by the gross value added at 1991 prices. Insurance Source of information: Registrar of Insurance Method of estimation: Insurance value of output/service includes 1. Total actual premiums- gross premium income from Life gross premium income other than Life 2. Total premium settlements- local investments income other income derived from Bahamas operations less 3. Claims/Due - claims & amount paid to policy holders (Life Insurance) claims paid (Life and other than life) claims outstanding (Life and other than life) claims outstanding (Life Insurance) 4. Additions to reserves- increase in life funds/reserves Unearned premium reserves 5 Reinsurance ceded externally- Life; other than Life Intermediate Consumption includes local management expenses, management expenses charged to Bahamas operations and other charges. Depreciation had to be estimated using the depreciation to gross value added ratio of the banking sector. Wages and salaries had to be estimated based on available data for The wages and salaries/gross value added ratio for 1989 was used. Constant prices: The value of gross output/service at current market prices for each year is deflated by the corresponding implicit deflator of gross output of the banking sub sector. Intermediate consumption and depreciation at 1991 prices were calculated as described above. Real Estate, Renting and Business Activities. Source of data: Bahamas Agricultural and Industrial Corporation Financial Report, 1990 Population Census, Central Bank, Registrar of Insurance, Establishment Surveys and Government Treasury Accounts. Method of Estimation

11 Current Prices: Real Estate includes the following- (i) gross rents, (ii) mortgage interest, (iii) real estate agents and (iv) Bahamas Agricultural & Industrial Corporation. Residential rental income is by far the largest component. Gross rents: This is the actual and imputed net residential rental income. From the 1990 census, gross rents paid as well as the total number of dwellings are obtained. Owned dwellings are measured as total dwellings minus rented dwellings. An imputed rent is then estimated. Real estate taxes are obtained from the Government sector. Total mortgages held by various institutions and interest rates from the Central Bank are easily sourced. Mortgage interest expense can then be calculated as mortgages held by interest rates. Applicable taxes are estimated as 50% of real property taxes. Insurance and fire premiums are also estimated. Depreciation and other costs are guesstimated at 2.5% of gross rents and repairs at 7.5%. Real Estate Agents: The business survey adequately covers this activity. The Bahamas Agricultural & Industrial Corporation provides the required information Business Services & Rental of Equipment The data are collected by the Establishment survey. Activities covered are Legal, Accounting, Market Research, Agricultural & Engineering, Advertising, Security, Photography etc. The data are blown up by 30% to account for Rental of equipment and Computer services. Constant prices: Real Estate: The gross output at current prices is deflated using the corresponding NP RPI numbers of rent paid rebased to Business Services: The gross output for each year is deflated by the corresponding overall NP RPI numbers rebased GOVERNMENT Source of data: Treasury Department and records of the National Insurance Board. Method of estimation: The administrative functions in education and health are included with those industries. The value of gross output is the sum of (i) intermediate consumption and (ii) gross value added which comprises (a) wages and salaries and (b) imputed depreciation of fixed assets. Constant prices: The components of the value of gross output i.e. gross value added and intermediate consumption are converted to 1991 prices and then summed to gross output

12 at 1991 prices. The index of number of persons employed in public Administration and Defense (adjusting for Education, Health and other activities taken from Government) was used to extrapolate the current price estimates. Intermediate consumption at current prices is deflated by the combined price index numbers of intermediate consumption for New Providence with base Depreciation at 1991 prices was calculated as previously described. OTHER SERVICES Education- Public Source of data is Government Treasury Accounts and College of the Bahamas. Method of estimation Current Prices: Gross value added includes these imputations (i) wages and salaries of technical assistance personnel (ii) government contribution to the National Insurance Board and (iii) Depreciation of Fixed assets. In imputing for wages, it is assumed that donor governments/institutions transfer funds to the government of the Bahamas which are then used for payment of wages and salaries. Constant Prices: The value of Gross output at 1991 prices is estimated by extrapolating the value of gross output from public education for 1991 by the index of number of students enrolled in Public schools. The intermediate consumption is deflated by the combined NP, RPI, base Education private: Source of data; Establishment surveys conducted in New Providence and Grand Bahama, which represent more than 90% of businesses engaged in this activity. Method of Estimation Current Prices: Gross output includes school fees and other charges. The inputs consist of the normal operating expenses. Constant prices: The current price estimates are deflated by the average NP RPI numbers for school fees and charges with 1991 as base. Intermediate consumption and Depreciation were calculated as previously described. Health and Social Work. Public Health- comprises Ministry of Health Administration, Dept. of Environmental Health, Rand Hospital, Princess Margaret Hospital, Sandilands Rehabilitation Center and Dept of Public Health.

13 Source of data is the Government Treasury Accounts Method of estimation Current Price- a procedure similar to Government is followed. Constant Prices: For gross value added, the overall number of employees in the Ministry of Health is used to calculate the index number of persons employed using base This index is used to extrapolate gross value added. Intermediate consumption at current prices is deflated by the combined NP RPI with 1991 as base. Private Health: Source of data is Establishment Surveys Method of estimation Current Prices: Income of medical practitioners, dentists, two private hospitals and their employees is collected by the Survey. For 1989 to 1992, data on hospitals were estimated using income per bed in Government hospitals although seemingly large. Constant Prices: The value of gross output at current prices is deflated using NP RPI of medical care and health with 1991 as base. Intermediate consumption at current prices is deflated by the combined NP RPI with the same base. Other Community Social and Personal Activities. Main Source: Establishment surveys This sector includes Sewerage and Refuse Disposal Group, septic tank companies, the Sewerage portion of the Water and Sewerage Corporation (estimated by the Government Sector) religious and charitable organizations, unions, radio and television, casinos, and private domestic workers. Current Prices: Septic tank companies- Consumer expenditure on this service was estimated by using number of loads by the average charge per load. Sixty per cent 60% was then assumed as income originating in this industry. Religious & charitable organizations and unions- income originating in a number of scientifically selected organizations by the total known number of such organizations represents the contribution of this group. Radio and television- A special survey was done in 1992 to provide estimates for this activity.from 1993, coverage was included in the establishment survey. Funeral parlours- A survey was conducted in 1992, income originating was deemed to be 60% of revenues.

14 Sporting activities other than golf- A survey was also done in 1992., income was deemed to be 50% of total revenue. Golf- the estimate for Golf was based on reference to informed opinion. Other sports and exterminators have not been surveyed and are still guesstimated Casinos- Estimates are based on statements of accounts on casinos obtained from the gaming board. Informal economy- Activity is estimated as 5% in 1989, 1990 and 1994 to present; 7% in 1992 and 1993 and 6% in Private domestic workers- A special census was conducted in 1990 on the number of household employees by income ranges. To arrive at the total, the mid point of the range was multiplied by the number of employees with the figure of $15,000 per annum being the assumed mid point of the open ended group. An estimate of 41% of gross output is estimated as intermediate consumption. Constant Prices- The overall implicit deflators of all the economic activities excluding " Other community, social and personal services' at current prices was used. These are implicit deflators for gross output, intermediate consumption, indirect taxes, subsidies and depreciation with base An index of tourist days is considered for casinos. Indirect Taxes and Subsidies: Main source of data: Govt. Treasury Accounts, Establishment surveys, Public Corporations, Ministry of Finance and Office of The Prime Minister. Current Prices: The government provides detail of all of the taxes paid and subsidies granted. The data obtained are used with the appropriate ISIC code at the four-digit level. Constant Prices: At current prices, the combined percentage share of i) Export Duties ii) Hotel Occupancy Tax and iii) Import Duties and Stamp Tax from the Customs Department, in relation to total Indirect Taxes ranges between 69.4 percent and 85.1 percent during the period in question. To calculate Total Indirect Taxes at 1991 prices, the estimates of i) Export Duties ii) Hotel Occupancy Tax and iii) Import Duties and stamp tax from Customs at 1991 prices are calculated separately and summed for each year. The combined total of these three items at 1991 prices for each year is then divided by the corresponding combined percentage share to arrive at the estimates of overall Indirect Taxes at 1991 prices. The estimate of each of the components. at 1991 prices is calculated as follows: Export Duties: the 1991 figure of this item is extrapolated with the "Quantum Index numbers of Commodity Exports" with the year 1991 as the base year (this is calculated by using the Commodity Exports at constant prices in each year divided by the 1991 commodity export at constant prices).

15 Hotel Occupancy Tax: the estimates at 1991 Prices are prepared by extrapolating the 1991 Hotel Occupancy Tax figure with the Index numbers of the number of Visitor nights with 1991 as the base year. Import Duties and Stamp tax from Customs Department: the 1991 figure of this variable is extrapolated with the Quantum Index numbers of commodity Imports. The next step is to sum the estimates of the three components at 1991 prices to estimate the overall Indirect Taxes at 1991 prices for the period in question. The Implicit Deflator of overall Indirect Taxes 1991 = 100, is obtained by dividing the overall Indirect Taxes at current prices for each year by the Overall Indirect Taxes at 1991 prices. Subsidies: The current price estimates of this variable are deflated by the Implicit Deflators of Indirect Taxes with 1991 = 100 to obtain the estimates of Subsidies at 1991 prices. Extra-territorial organizations and bodies There are three such bodies in the Bahamas: 1. Inter American Development Bank, 2. Organization of American States and 3. Pan American Health Organization. It should be noted that the premises of these organizations are not extraterritorial in the same sense as those of embassies, which are, considered part of their home countries. The earnings of the national employees of embassies are deemed to be part of the national and domestic income of their mother country. International agencies have no home country as such and income originating in these organizations must thus be counted in their country of actual residence. Information on the salaries and wages paid by these organizations was obtained by telephone. EXPENDITURE ON THE GROSS DOMESTIC PRODUCT The product side has by and large followed the International Standard Industrial Classification (ISIC). On the expenditure side, the United Nations System of National Accounting (UNSNA) classification was followed as closely as local circumstances permit and to the degree to which such terminology agrees with well- established local nomenclature.

16 A. Government Final Consumption Expenditure Main source of data: Government Treasury Accounts Current Prices: The main items are: compensation of employees, consumption of fixed capital and net purchases of goods and services. The net here refers to purchases after the deduction of items sold to the public by government departments. Government Final Consumption Expenditure is divided into: 1. Collective Consumption Expenditure and 2. Individual Consumption Expenditure Individual consumption expenditure consists of expenditure on Education and Health. When data permit this should also include social security and welfare, sports and culture. The purpose of this breakdown enables the identification of individual consumption provided by government (The UN also recommends this method of presentation). It permits true individual consumption to be shown, irrespective of the method of its financing or its institutional delivery. This presentation also permits international and inter- temporal comparisons without distortions due to differing institutional arrangements. By breaking down government consumption in the order suggested above, total government consumption can be obtained by adding collective and individual government consumption expenditure and total individual consumption can be obtained by adding individual government consumption expenditure to the next item which is Private Final Consumption Expenditure. In order to avoid any misunderstanding, however, it should be clearly pointed out that although government- financed individual consumption can be added to either government or private final expenditure, it cannot of course be added to both at the same time. Constant Prices: This is the constant price figure from the Public Administration & defense, Public Education and Public Health. B. Private Final Consumption Expenditure: Main source of data: Establishment Surveys, Ministry of Tourism, Central Bank, registrar of Insurance, Batelco, Bahamas Electricity Corp., Post Office and Water & Sewerage. Current Prices: It is recommended that this total NOT be broken down (as in previous Bahamian publications) into Expenditure by Households and Private Non-profit Institutions Serving Households. There are basically three methods to measure private final consumption expenditure utilizing: (i) consumer expenditure survey,

17 (ii) (iii) commodity flows or input/output tables, and retail trade and related surveys. The choice basically depends on the availability and soundness of the data source in each approach. The previous Bahamian private consumption expenditure estimate was based on the consumer expenditure survey methodology. The fundamental drawback in this method is that: (a) the survey is considerably out of date (1983) and (b) good measures to extrapolate do not exist. The second methodology requires a great number of industrial surveys with a large supply of detailed information. This is not within the present survey capability of the Department. This then leaves the third method which basically consists of basing private consumption expenditure on retail trade and related surveys and adjusting the survey by deducting for items not bought by consumers and adding other expenditures by consumers not covered by such surveys. In 1994, a new consumer expenditure survey was conducted; private consumption expenditure derived in the above manner was carefully evaluated against this survey. It was found that the estimates for PFCE were not very different from the household expenditure survey results. The basic start for estimating Private Final Consumption Expenditure is to source the total of Retail Trade Sales from the establishment survey. Minor adjustments to eliminate business purchases have to be made to this item and then other consumer expenditures not covered by the retail trade survey have to be added to arrive at Private Final Consumption Expenditure. Business purchases are deemed to be 50 percent of sale of lumberyard stores; these are removed from retail sales. Such purchases are either mainly made to business (building contractors) or if bought by individuals are purchased by them as homeowners that is business persons. The same reasoning applies to a portion of sales of office and business machine equipment. In the Bahamas, there are one or two retailers selling specialized kitchen equipment almost exclusively to caterers and so this is also eliminated. If deductions for these enterprises are too large, that is, sales to final consumers, this will in all likelihood be counterbalanced by sales to business on the part of stationers, hardware and furniture stores and other establishments which include some businesses in their roster of clients.

18 Sales of imported new cars and imported used cars should be omitted from sales of car dealers. Sales of car dealers should therefore be adjusted to consist of sale of parts and services to private individuals as such. At the moment, this adjustment is rather arbitrary and is based on the same relationships used to estimate imports of cars to individuals and businesses. It is desirable to obtain a differentiation between sales of imported used cars and Bahamian used cars, only the mark-up on the latter -if obtainable or somehow estimable -should be included with car dealer sales. It is also assumed that Bahamian used cars are not sold by business (other than car dealers) to Bahamian and vice versa and that intra-personal sector transactions cancel each other. An adjustment in the opposite direction that is, final purchases by consumers from wholesalers will also have to be made. This was determined by using the Retail Sales of Wholesalers as obtained from the Establishment. An estimate for subsistence farming and fishing is also included here. Sales of restaurant and gross revenue of hotels must be added to personal consumption expenditure. However, the greater portion of such sales are no doubt made to tourists and are considered as exports. Such expenditure therefore must be removed from personal consumption expenditure. However, in order to subtract the tourist portion it must be ascertained that such expenditures -made by all possible spenders - are included in the first place in our total personal consumption expenditure. Since a survey of the straw market was not conducted and since it is unlikely that residents buy significant quantities of goods from these vendors, these are then added to final private consumption expenditure figures and in the Production Approach Retail Trade figure. The estimate of expenditure on sports activities (less expenditure on golf counted in other services) as reported in tourist expenditure was used. A large portion of final personal consumption consists of services. Expenditure on medical (including dental and veterinary services) was obtained from the establishment surveys. Before inclusion in the survey, the revenue of private hospitals was estimated as three times the per bed expenditure of the government hospitals. This was done on the assumption that more services are performed by private medical facilities than Government. 60 percent of the total value added was considered salaries and wage and 12 percent was estimated to be gross profits. Transportation services were also obtained from the establishment survey and were reduced somewhat to account for the business portion of such services. The percentages assigned to individuals were: a) Land transportation -80% (b) Motor vehicle -80% (c) Car Rentals -100% d) Tour operators -100% (e) Paradise island Bridge -80% 2) Air Transportation is broken down into: a) Foreign Air -25% b) Local Air -80%

19 3) Marine Transport - 20% 4) The Storage -10% - Since, air travel will also include some business and government travel, these revenues must be excluded from consumer expenditure. One of the major travel agency hazarded the guess that business and government travel accounts for 25 percent of foreign airline revenue. A certain proportion of business services must also be taken as personal services. From the establishment survey, gross revenue of lawyers, architects and photographers was obtained. The proportion of such services utilized by final consumers will have to be arbitrarily determined and included in final consumption. For now an arbitrary ratio of 20 percent was suggested as consumer services. These establishments are currently asked for their source of revenue (business, government, and individuals), the data still need some refining. The Other personal service expenditures were in the past based on the national accounts survey of two census districts in New Providence and were adjusted by 5% for noncoverage of such businesses. The figure was then blown up by the total number of all such businesses in the Bahamas.. A separate estimate for expenditure on funerals was also included here; a survey was conducted in The cost of a funeral was multiplied by the number of deaths obtained from vital statistics. Later on, this expenditure has been included in the Other Community, Social & Personal Services survey and the figure is taken from there. Expenditure in golf clubs is also based on reference to informed opinion. Expenditure in casinos is taken directly from the reports of the Gaming Board of the Bahamas and is equal to the gross income of the casinos. This gross income (including a small portion of miscellaneous revenue) is basically the money gambled by persons minus their winnings paid out by the casinos. Tips to croupiers (again obtained from the Gaming Board) are also included here. Expenditure by persons on water, sewerage, electricity and communication is broken down between services to persons and others by the respective suppliers and obtained directly from them. The method of arriving at expenditure on private septic tank services was described earlier. Expenditure by persons on postal services is an arbitrary estimate. Estimates of household employees which were also described earlier must also be included in consumer expenditure. Calculation of the New and Used Cars Estimate: The present method of estimating car sales directly from imports should be maintained. Since many persons (and probably also some businesses) import cars directly from the USA (and other countries) reliance on retail sales of automobiles would be misleading. The relevant imports of cars - particularly from the USA - comprise both new and used cars. The reason for this is quite

20 simply that imported used cars have not been previously counted in Bahamian GDP and are "new" to the Bahamian economy. The total value of the imports of vehicles is divided between passenger cars and other vehicles. Arbitrarily, 80 percent of passenger vehicles is allocated to household consumption, and the remainder together with all commercial vehicles is included in gross fixed capital formation. An estimate of import duties and transport & trade mark- up is added to these figures Expenditure on gross rents -includes the imputed portion of financial services of banks, (imputation) the administrative portion of consumer interest and the purchase of insurance services which have already been described in the estimation of GDP according to the production approach. Consumer expenditure also includes the total payment for goods and services of all associations of individuals serving households namely charitable, religious and private educational institutions. The Establishment Section first surveyed this area, in Both religious and private institutions play a very important role in the social and economic fabric of the Bahamas. However, this survey was discontinued in 1993 because of the objections of certain religious leaders. Since that time estimates have been based on the CPI until the survey can be resumed. Estimates for Associations, Libraries, sporting activities and Health clubs are also included. There are approximately 40 labour unions in the Bahamas according to the Department of Labor. The membership in the union is about 26,000. Based on known membership fees the total income (and therefore expenses) is approximately $5 million. Eighty per cent or $4 million is assumed to be remuneration of union officers and employees Since there is no income tax in the Bahamas and few indirect taxes, except import duties, probably little "underground" activity takes place. Underground activity is here defined as economic activity hidden from government s (and probably the statistician s view) in order to escape taxation. However, the informal economy defined as small-scale entrepreneurship with its base in the home and mainly as a secondary economic activity is alive and doing well in the Bahamas. The Bahamas had negative growth years in 1991 & 1992 and hence there was a growth of lunch vendors, roadside vendors etc. It was suggested that for the time being, an arbitrary percentage - (1989,1990 and 1994 to present = 10%; 1993 & 1992 = 12% and 1991 = 11%) of private consumption expenditure be allocated to this expenditure following the trend of Retail Trade Sales during this period. A slightly lower figure of production subtotal should be put on the income side to differentiate material supplies included on the expenditure side. These figures are based on the fact that in many tax economies after every effort has been made to estimate all specific activities the remaining underground effort has been estimated between 3 to 5 percent of GDP. Foreign sector adjustments: Since the method used to estimate final private consumption expenditure up to this point includes the sales of all goods and services in the Bahamas both to residents and foreign visitors, sales to the latter group must be deducted from all

21 sales to final consumers and included as exports. The basic data for such sales come from the Ministry of Tourism and are based on their exit survey of departing tourists. Constant Prices: The PFCE is deflated using the Average NP RPI all items index rebased to In the future it is recommended that appropriate indices be developed for the major areas. Gross Capital Formation Main source of data: Establishment surveys, Central Bank, DOS External Trade Report, Public Corporations and USA Statistical Abstract.. Current Prices: Gross Capital Formation is composed of Change in Stocks and Gross Fixed Capital Formation. The latter is composed of Residential Building Construction, Other Construction, and Machinery and Equipment. The value of the change in stocks is probably at the moment the weakest estimate. It is the actual change in stocks reported by government corporations and retail and wholesale trade. The response to the change in values question reported by other industries was not considered good and is probably reasonably insignificant. It should be borne in mind however, that the value change in inventories reported in the establishment survey contains no information on inventory valuation practices by the respondents. Since there is also no price index available other than retail prices, the value of the change of stocks could not be adjusted to reflect the physical change in the value of inventories and the change here is therefore exactly what it says -the change in the value of inventories. The Residential and Non Residential Construction data are obtained from the Establishment survey of the construction industry. The residential & non- residential data are further adjusted for: a) interest fees (Value of mortgages times interest rate) b) Insurance Fees (i) fire insurance premium (ii) % Residential & Non-Residential of total buildings i.e. (figure from Census 1990 adjusted in each year for new buildings constructed). Architects fees: -Average Architects fees for Residential & Non Residential (i.e estimate of fees adjusted in each year by % change of Residential Construction Permits) multiplied by mortgages of New Res. & Non Residential Construction

22 Residential construction is adjusted for the family island to account for the value of Res. Construction put in place in the islands. This is calculated by applying the % Family Island of total Building Permits approved. The government construction has been removed since it is felt that this figure is already counted in residential & non-residential construction items and that the data are based on receipts by construction firms who also do work for government. The only construction done by government is carried out by Ministry of works and this is on roads /bridges etc. therefore 20% of the government figure for "Other Construction" as the work done by Min. of Works was used and it was assumed that the remaining 80% is bided out. The total construction estimates for 1991 are interpolated back to 1989.and 1990 on the basis of building material imports other than cement. (Data on the value of cement imports revealed some peculiar movements and it were not regarded as reliable) The value of Machinery & Equipment and Transportation equipment is directly taken as the value of all relevant imports. These imports are adjusted upwards for: i) Import duties paid: a) In 1998 the External trade section was able to produce the amount of duty paid in 1998 by the finest detail b) In 1999, the Import Duty for 1998 for Machinery & Equipment and Transport equipment items was used. The percentage each represented of this total was estimated and multiplied by Machinery & Equipment and Transport equipment 1999 items that recorded duty paid. c) 1997 to 1989 is the 1998 figure adjusted for External trade Import data of Machinery & Equipment and Transport equipment% changes. ii) iii) Stamp Tax -the Central bank Report s figure of stamp taxes on import multiplied by % Machinery & Equipment and Transport equipment for 1998 as a proportion of total duty paid. Estimated mark-up by the importer (60% on all items and 38% on certain Transport items). Certain selected items -such as cars already previously described -and other items, which can be either consumer or capital expenditures, are split between capital formation and implicit consumption expenditure on the basis of ratios based on judgment. Constant Prices: The Construction items are deflated using the USA Construction cost index discussed previously. The Change in stock is deflated using NP RPI all items index (rebased). The Machinery and Transport equipment is deflated using the USA Export Price Index (the machinery and transport equipment indices) again rebased.