## 1kazea2023002 - Section 1

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---

### Mission overview and main objectives
- A technical assistance (TA) mission of the Caucasus, Central Asia, and Mongolia Regional Capacity Development Center (CCAMTAC) visited Astana during February 20 – March 3, 2023.
- Main tasks:
  - (i) assist the Bureau of National Statistics (BNS) under the Agency for Strategic Planning and Reforms of the Republic of Kazakhstan in developing quarterly GDP by expenditure (GDPE) on a discrete basis;
  - (ii) review the existing quarterly estimates of GDP by production (GDPP);
  - (iii) review the existing methods for the compilation of the non-observed economy (NOE) and provide recommendations for further improvement.

### Key outcomes and findings
- Five working files were compiled during the mission: four files with quarterly compilations of GDPE components and a fifth file aggregating these into discrete quarterly GDPE estimates.
  - The four component files cover:
    - Household Final Consumption Expenditure (HFCE) and non-profit institutions serving households (NPISH).
    - General Government final consumption expenditure.
    - Gross fixed capital formation (GFCF) and changes in inventories.
    - Exports and imports of goods and services.
- Quarterly data on GDPE components were benchmarked with the annual estimates; price indices were collected at the average prices of the previous year.
- Chain-linked time series for each GDPE component were compiled using the annual overlap technique and aggregated.
- Real GDPE growth rates for cumulative periods compiled from the discrete quarterly data significantly differ from the cumulative growth rates currently published on the website.
- The nominal level of GDPE is slightly higher than the published estimates.
- These differences were caused by several adjustments made as part of the implementation of the 2008 System of National Accounts (2008 SNA).

### Priority recommendations (action plan highlights)
- Priority recommendations, target dates, responsible institutions, and status of implementation as of August 2023:
  - April 2023 — Compile FISIM separately for national and foreign currency. — BNS — Complete
  - April 2023 — Exclude the part of FISIM that is intended for household consumption from intermediate consumption. — BNS — Complete
  - October 2023 — Compile time series of volume indices. — BNS — Ongoing
- Selected entries from the detailed priority action/milestone table (statuses as of August 2023):
  - Outcome: Quarterly GDP estimates are based on discrete source data
    - Compile FISIM separately for national and foreign currency. — Target Completion: April 2023 — Status: Complete
    - Exclude the part of FISIM that is intended for household consumption from intermediate consumption. — Target Completion: April 2023 — Status: Complete
    - Update estimates of cultivated biological resources. — Target Completion: February 2024 — Status: Ongoing
    - Compile quarterly SUT at the section level of NACE Rev.2 for the quarters with large statistical discrepancy between GDPP and GDPE. — Target Completion: September 2023 — Status: Ongoing
    - Estimate quarterly military expenditures and include them in GFCF. — Target Completion: February 2024 — Status: Ongoing
    - Identify the least reliable indicators and adjust them to reduce the statistical discrepancy. — Target Completion: October 2023 — Status: Ongoing
    - Compile time series of volume indices — Target Completion: October 2023 — Status: Ongoing
    - Adjust data on exports and imports of goods to ensure compliance with the balance of payments data. — Target Completion: November 2023 — Status: Ongoing
    - Develop additional data sources on final consumption expenditure of NPISH and update the existing estimates — Target Completion: November 2023 — Status: Ongoing
    - Develop specific questionnaires to observe corporations that provide other financial services. — Target Completion: December 2023 — Status: Ongoing
    - Remove the "other inventories" column from the survey questionnaire. — Target Completion: December 2023 — Status: Ongoing
    - Replace the column "goods for trade" with "goods for resale" in the survey questionnaire. — Target Completion: December 2023 — Status: Ongoing
  - Priority coding: H – High; M – Medium

### Detailed technical assessment — Quarterly GDP by expenditure

- General
  - Five Excel files were created: four with component-level quarterly chain-linked time series and a fifth aggregating them into total GDP.
  - Some data sources for quarterly GDPE components are incomplete; detailed data on cultivated biological assets and military expenditures are required for GFCF and are being processed to be added by the end of 2023.
  - Aggregated quarterly GDP estimates are therefore not considered final and reconciliation with quarterly GDPP is premature.

- Household Consumption (HFCE and NPISH)
  - Quarterly data on HFCE at current prices are available since 2010.
  - A very large increase in 2011 compared to 2010 lacked economic justification; annual HFCE of 2010 was adjusted according to the average annual growth rate in the following years.
  - Benchmarking of annual and quarterly HFCE was carried out at the two-digit level of COICOP; aggregation of two-digit codes produced total HFCE at current prices.
  - CPI was used to compile HFCE at the average prices of the previous year; HFCE was also compiled at the annual average prices of the current year and chain-linked via the annual overlap method at the two-digit level of COICOP.
  - NPISH final consumption was compiled in a separate worksheet using expert estimates due to limited quarterly data sources. Main assumption: final consumption of NPISH equals 1.1 percent of GDPP at current prices. The relevant CPI was used to compile chain-linked time series for NPISH.

- Gross Fixed Capital Formation (GFCF)
  - GFCF was divided into categories and quarterly chained volume estimates compiled using the annual overlap method: dwellings and other buildings, machinery and equipment, intellectual property products including research and development, cultivated biological resources, and military expenditures.
  - Dwellings and other buildings: annual and quarterly data available from regular surveys; benchmarking matched quarterly nominal sums to annual nominal data; deflation via the producer price index (PPI) of the construction industry.
  - Machinery and equipment: compiled using domestic output and import data; imported machinery and equipment are the largest part of this component; domestic output deflated by PPI, imported machinery and equipment deflated by import price index.
  - Research and development data show unstable changes and a downward trend in private sector investments; may reflect decreased survey response rate or methodological changes.
  - Military expenditures data are not available.
  - Cultivated biological resources: current data do not include the cost of raising cattle; after the methodological change this value at current prices will be increased to some extent. Agricultural PPI is used for deflating cultivated biological resources.

- Changes in Inventories
  - Compiled alongside GFCF in a separate worksheet following international best practice: stock values at the beginning and end of the quarter are compiled at average quarterly prices; changes in inventories at current prices are the difference between opening and closing stocks expressed in average quarterly prices, excluding holding gains/losses to comply with the 2008 SNA.
  - Outliers persist due to lower quality of data sources.
  - Survey questionnaire structure covers five categories: Finished goods; Commodities; Materials and supplies; Work in progress; Other inventories.
  - The 2008 SNA defines four categories: Finished goods; Goods for resale; Materials and supplies; Work-in-progress.
  - The mission recommended removing "other inventories" from the questionnaire because it is not defined in 2008 SNA and can mix parts of the four standard categories, reducing data quality.
  - The questionnaire currently uses the label "goods for trade" which leads many enterprises to misclassify stocks of their own production as trade. The mission recommended renaming the category to "goods for resale" to prevent overestimation of goods-for-resale inventories and underestimation of finished goods.

- Government Final Consumption
  - General government final consumption compiled in a separate file with two worksheets for chain-linked time series of individual and collective consumption.
  - Main data source: economic and functional classification of the general government budget.
  - Wage index and CPI were used to compile estimates at the previous year’s prices.
  - Comparison of chain-linked collective consumption with output of public administration (production approach) revealed significant inconsistencies in some periods; adjustments reduced discrepancies.

- Exports and Imports of Goods and Services
  - Foreign trade data processed in one file with separate worksheets for exports of goods, imports of goods, exports of services, and imports of services.
  - Data on foreign trade at current prices are obtained from the balance of payments.
  - Export and import price indices were used to compile exports and imports at the previous year’s prices.
  - Various price indices were applied to deflate exports and imports of services.

### Issues affecting reconciliation and NOE compilation
- Differences between the newly compiled discrete quarterly GDPE and previously published series arise from 2008 SNA implementation adjustments and the choice to use implicit deflators for chain-linking to ensure consistency with annual volume growth rates.
- Improvements needed to reconcile quarterly GDPP and GDPE and to improve NOE compilation:
  - Improved compilation of cultivated biological assets.
  - Estimation and inclusion of military expenditures in GFCF.
  - Improvement of price indices for deflating certain types of changes in inventories.
  - Identification and adjustment of least reliable indicators.
  - Compilation of quarterly SUT at section level for problematic quarters.

*Source: IMF Country Report No. 23/419 — REPUBLIC OF KAZAKHSTAN, TECHNICAL ASSISTANCE REPORT—NATIONAL ACCOUNTS STATISTICS MISSION; Report on National Accounts Mission, February 20–March 3, 2023; DECEMBER 2023.*

### Section 1

### 1kazea2023002 - Section 1

### Mission overview and main objectives
- A technical assistance (TA) mission of the Caucasus, Central Asia, and Mongolia Regional Capacity Development Center (CCAMTAC) visited Astana during February 20 – March 3, 2023.
- Main tasks:
  - (i) assist the Bureau of National Statistics (BNS) under the Agency for Strategic Planning and Reforms of the Republic of Kazakhstan in developing quarterly GDP by expenditure (GDPE) on a discrete basis;
  - (ii) review the existing quarterly estimates of GDP by production (GDPP);
  - (iii) review the existing methods for the compilation of the non-observed economy (NOE) and provide recommendations for further improvement.

### Key outcomes and findings
- Five working files were compiled during the mission: four files with quarterly compilations of GDPE components and a fifth file aggregating these into discrete quarterly GDPE estimates.
  - The four component files cover:
    - Household Final Consumption Expenditure (HFCE) and non-profit institutions serving households (NPISH).
    - General Government final consumption expenditure.
    - Gross fixed capital formation (GFCF) and changes in inventories.
    - Exports and imports of goods and services.
- Quarterly data on GDPE components were benchmarked with the annual estimates; price indices were collected at the average prices of the previous year.
- Chain-linked time series for each GDPE component were compiled using the annual overlap technique and aggregated.
- Real GDPE growth rates for cumulative periods compiled from the discrete quarterly data significantly differ from the cumulative growth rates currently published on the website. The nominal level of GDPE is slightly higher than the published estimates.
  - These differences were caused by several adjustments made as part of the implementation of the 2008 System of National Accounts (2008 SNA).

### Priority recommendations (action plan highlights)
- Priority recommendations, target dates, responsible institutions, and status of implementation as of August 2023:
  - April 2023 — Compile FISIM separately for national and foreign currency. — BNS — Complete
  - April 2023 — Exclude the part of FISIM that is intended for household consumption from intermediate consumption. — BNS — Complete
  - October 2023 — Compile time series of volume indices. — BNS — Ongoing
- Detailed priority action/milestone table (selected entries and statuses as of August 2023):
  - Outcome: Quarterly GDP estimates are based on discrete source data
    - Compile FISIM separately for national and foreign currency. — Target Completion: April 2023 — Status: Complete
    - Exclude the part of FISIM that is intended for household consumption from intermediate consumption. — Target Completion: April 2023 — Status: Complete
    - Update estimates of cultivated biological resources. — Target Completion: February 2024 — Status: Ongoing
    - Compile quarterly SUT at the section level of NACE Rev.2 for the quarters with large statistical discrepancy between GDPP and GDPE. — Target Completion: September 2023 — Status: Ongoing
    - Estimate quarterly military expenditures and include them in GFCF. — Target Completion: February 2024 — Status: Ongoing
    - Identify the least reliable indicators and adjust them to reduce the statistical discrepancy. — Target Completion: October 2023 — Status: Ongoing
    - Compile time series of volume indices — Target Completion: October 2023 — Status: Ongoing
    - Adjust data on exports and imports of goods to ensure compliance with the balance of payments data. — Target Completion: November 2023 — Status: Ongoing
    - Develop additional data sources on final consumption expenditure of NPISH and update the existing estimates — Target Completion: November 2023 — Status: Ongoing
    - Develop specific questionnaires to observe corporations that provide other financial services. — Target Completion: December 2023 — Status: Ongoing
    - Remove the "other inventories" column from the survey questionnaire. — Target Completion: December 2023 — Status: Ongoing
    - Replace the column "goods for trade" with "goods for resale" in the survey questionnaire. — Target Completion: December 2023 — Status: Ongoing
  - Priority coding: H – High; M – Medium

### Detailed technical assessment — Quarterly GDP by expenditure
- General
  - Five Excel files were created: four with component-level quarterly chain-linked time series and a fifth aggregating them into total GDP.
  - Some data sources for quarterly GDPE components are incomplete; detailed data on cultivated biological assets and military expenditures are required for GFCF and are being processed to be added by the end of 2023.
  - Aggregated quarterly GDP estimates are therefore not considered final and reconciliation with quarterly GDPP is premature.

- Household Consumption (HFCE and NPISH)
  - Quarterly data on HFCE at current prices are available since 2010.
  - A very large increase in 2011 compared to 2010 lacked economic justification; annual HFCE of 2010 was adjusted according to the average annual growth rate in the following years.
  - Benchmarking of annual and quarterly HFCE was carried out at the two-digit level of COICOP; aggregation of two-digit codes produced total HFCE at current prices.
  - CPI was used to compile HFCE at the average prices of the previous year; HFCE was also compiled at the annual average prices of the current year and chain-linked via the annual overlap method at the two-digit level of COICOP.
  - NPISH final consumption was compiled in a separate worksheet using expert estimates due to limited quarterly data sources. Main assumption: final consumption of NPISH equals 1.1 percent of GDPP at current prices. The relevant CPI was used to compile chain-linked time series for NPISH.

- Gross Fixed Capital Formation (GFCF)
  - GFCF was divided into categories and quarterly chained volume estimates compiled using the annual overlap method: dwellings and other buildings, machinery and equipment, intellectual property products including research and development, cultivated biological resources, and military expenditures.
  - Dwellings and other buildings: annual and quarterly data available from regular surveys; benchmarking matched quarterly nominal sums to annual nominal data; deflation via the producer price index (PPI) of the construction industry.
  - Machinery and equipment: compiled using domestic output and import data; imported machinery and equipment are the largest part of this component; domestic output deflated by PPI, imported machinery and equipment deflated by import price index.
  - Research and development data show unstable changes and a downward trend in private sector investments; may reflect decreased survey response rate or methodological changes.
  - Military expenditures data are not available.
  - Cultivated biological resources: current data do not include the cost of raising cattle; after the methodological change this value at current prices will be increased to some extent. Agricultural PPI is used for deflating cultivated biological resources.

- Changes in Inventories
  - Compiled alongside GFCF in a separate worksheet following international best practice: stock values at the beginning and end of the quarter are compiled at average quarterly prices; changes in inventories at current prices are the difference between opening and closing stocks expressed in average quarterly prices, excluding holding gains/losses to comply with the 2008 SNA.
  - Outliers persist due to lower quality of data sources.
  - Survey questionnaire structure covers five categories: Finished goods; Commodities; Materials and supplies; Work in progress; Other inventories.
  - The 2008 SNA defines four categories: Finished goods; Goods for resale; Materials and supplies; Work-in-progress.
  - The mission recommended removing "other inventories" from the questionnaire because it is not defined in 2008 SNA and can mix parts of the four standard categories, reducing data quality.
  - The questionnaire currently uses the label "goods for trade" which leads many enterprises to misclassify stocks of their own production as trade. The mission recommended renaming the category to "goods for resale" to prevent overestimation of goods-for-resale inventories and underestimation of finished goods.

- Government Final Consumption
  - General government final consumption compiled in a separate file with two worksheets for chain-linked time series of individual and collective consumption.
  - Main data source: economic and functional classification of the general government budget.
  - Wage index and CPI were used to compile estimates at the previous year’s prices.
  - Comparison of chain-linked collective consumption with output of public administration (production approach) revealed significant inconsistencies in some periods; adjustments reduced discrepancies.

- Exports and Imports of Goods and Services
  - Foreign trade data processed in one file with separate worksheets for exports of goods, imports of goods, exports of services, and imports of services.
  - Data on foreign trade at current prices are obtained from the balance of payments.
  - Export and import price indices were used to compile exports and imports at the previous year’s prices.
  - Various price indices were applied to deflate exports and imports of services.

### Issues affecting reconciliation and NOE compilation
- Differences between the newly compiled discrete quarterly GDPE and previously published series arise from 2008 SNA implementation adjustments and the choice to use implicit deflators for chain-linking to ensure consistency with annual volume growth rates.
- Improvements needed to reconcile quarterly GDPP and GDPE and to improve NOE compilation:
  - Improved compilation of cultivated biological assets.
  - Estimation and inclusion of military expenditures in GFCF.
  - Improvement of price indices for deflating certain types of changes in inventories.
  - Identification and adjustment of least reliable indicators.
  - Compilation of quarterly SUT at section level for problematic quarters.

*Source: IMF Country Report No. 23/419 — REPUBLIC OF KAZAKHSTAN, TECHNICAL ASSISTANCE REPORT—NATIONAL ACCOUNTS STATISTICS MISSION; Report on National Accounts Mission, February 20–March 3, 2023; DECEMBER 2023.*

### Section 2

### Section 2

### Aggregation of Final Expenditure Categories and GDPE vs GDPP
- Initial compilation:
  - Detailed structures of exports and imports of goods were compiled from the detailed data of the balance of payments.
  - Appropriate price index selected for individual services: PPIs or wage indices mainly used for deflation of exports of services.
  - To deflate imports of services, main importer countries were determined and their weighted CPI on tourism related services was used to deflate imports of services, which predominantly relate to tourism.
- Revisions and adjustments:
  - The Central Bank of Kazakhstan has recently revised the time series of exports and imports of goods in the balance of payments.
  - The new time series are compiled by considering improved accounting of foreign trade transactions.
  - Therefore, the BNS should adjust the exports and imports of goods to ensure the compliance with the balance of payments.
- Compilation process for GDPE:
  - Expenditure components from the previous four files were aggregated to compile GDPE.
  - Final expenditure components were collected at current prices, average prices of the current year, and average prices of the previous year.
  - Chain-linked time series of GDPE were compiled by applying the annual overlap technique.
- Discrepancies between GDPE and GDPP:
  - The mission compared quarterly estimates of GDPE and GDPP; differences are quite significant.
  - In some quarters, the discrepancy exceeds five percent of GDP.
  - Causes include:
    - Some components of GDPE are still to be adjusted.
    - Quarterly GDPP is also subject to revision, as volume indices for output of some industries are being revised.
  - Due to insufficient quality of data sources, significant discrepancies may exist between quarterly estimates of GDPP and GDPE.
  - It is important to compile supply and use tables (SUT) for each quarter with large discrepancies to compare resources and uses by each industry, identify less reliable indicators and reduce the statistical discrepancy.
  - The next mission, in April 2023, will help the BNS to compile the preliminary quarterly SUT at the section level European Classification of Economic Activities (NACE Rev.2).

- Recommended Actions (expenditure aggregation and reconciliation):
  - Update estimates of cultivated biological resources.
  - Estimate quarterly military expenditures and include them in GFCF.
  - Develop additional data sources on final consumption expenditure of NPISH and update the existing estimates.
  - Remove the "other inventories" column from the survey questionnaire.
  - Replace the column "goods for trade" with "goods for resale" in the survey questionnaire.
  - Adjust data on exports and imports of goods to ensure compliance with the balance of payments data.
  - Compile quarterly SUT at the section level of NACE Rev.2 for the quarters with large statistical discrepancy between GDPP and GDPE.
  - Identify the least reliable indicators and adjust them to reduce the statistical discrepancy.

### Quarterly GDP by Production
- Progress and methodological changes:
  - After the October 2022 TA mission, the BNS made some progress in improving the quality of volume indices.
  - Indices of industrial production have already been compiled in the form of a time series.
  - Other BNS departments are planning to implement the recommendation that volume indices for the previous month and the corresponding month of the previous year should be consistent when displayed in the form of a time series.
  - During the mission, a practical example of compiling volume indices as a time series was presented and advantages highlighted over the current practice of calculating volume indices independently for different periods, which produces mutually exclusive outcomes.
  - BNS staff fully agreed and noted that the volume indices compiled by the new method will be available in a few months.
  - The mission and NAD staff noted that it is very important to get this information before the second half of 2023, as discrete quarterly GDP is already scheduled to be released at that time.
- Financial services and FISIM:
  - The mission and NAD staff discussed compilation of financial services, covering financial intermediation services indirectly measured (FISIM) and other financial services.
  - Compilation of FISIM is carried out in accordance with the 2008 SNA standards.
  - The SNA interest rate is calculated as the weighted average of interest rates on the total deposits and loans.
  - The average quarterly stocks of deposits and loans are used as weights.
  - FISIM is compiled by types of loans and deposits for each institutional sector of the economy.
  - The mission observed that the interest rates on loans and deposits issued in national and foreign currencies differ significantly.
  - Recommendation: it is better if the BNS applies two SNA interest rates when compiling FISIM, one for loans and deposits issued in national currency, and the other for loans and deposits issued in foreign currency.
  - At the next stage, FISIM is divided by GDP end-use categories, which includes FISIM for intermediate consumption, final consumption, exports and imports.
  - FISIM intended for intermediate consumption is distributed according to individual economic activities, and FISIM for final consumption is added to the HFCE.
  - The mission observed that when apportioning intermediate consumption of FISIM by activity, FISIM for final consumption was added to the total amount.
  - The mission explained that FISIM for final consumption is added to HFCE and should not be subtracted from the output of individual activities.
  - As a result of this change, the gross value added (GVA) of financial services will be increased significantly.
- Other financial services and data gaps:
  - Other financial services include:
    - Micro financial organizations
    - Investment funds
    - Credit unions
    - Brokers
    - Pawnshops and other money lenders
  - These organizations are not covered by the statistical surveys for the purpose of collecting statistical information.
  - Compilation of quarterly national accounts depends on the quarterly and annual information they publish on the website; this information is usually generalized and not always sufficient for accuracy of national accounts estimates.
  - Using certain assumptions, it is possible to approximate quarterly output and GVA from this information.
  - The mission and NAD staff reviewed available data and developed assumptions to estimate GVA from this information.
  - The mission highlighted the importance of additional data sources that could improve the quality of these estimates.
  - Recommendation: the BNS should start a regular survey of these organizations with statistical questionnaires specially designed for them, considering the needs of national accounts compilers; the mission can assist the BNS in developing these questionnaires.

- Recommended Actions (production side):
  - Compile time series of volume indices.
  - Compile FISIM separately for national and foreign currency.
  - Exclude the part of FISIM that is intended for HFCE from intermediate consumption.
  - Develop specific questionnaires to observe corporations that provide other financial services.

### Officials Met During the Mission
- Listed officials from BNS engaged during the mission:
  - Mr. Zhandos Shaimardanov — BNS — Head of BNS
  - Mr. Zhasser Jarkinbayev — BNS — Deputy Head of BNS
  - Mr. Aset Nakipbekov — BNS — Director of National Accounts Department (NAD)
  - Ms. Assel Torgautova — BNS — Deputy Director of NAD
  - Ms. Alina Beisebekova — BNS — Head of Division, NAD
  - Ms. Togzhan Bekturova — BNS — Head of Division, NAD
  - Ms. Zaure Zhunussova — BNS — Chief expert, NAD
  - Mr. Gabiden Torebekov — BNS — Chief expert, NAD
  - Ms. Aigerim Isabekova — BNS — Chief expert, NAD
  - Ms. Indira Baimuratova — BNS — Chief expert, NAD
  - Ms. Zhanna Suleymenova — BNS — Chief expert, NAD

*IMF | CCAMTAC TA Report – Kazakhstan Report on National Accounts Mission — Section 2*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1kazea2023002.pdf_