SWEDEN: Illegal Narcotics in the National Accounts

Source details

Under the ESA regulation, illegal activities must be included in the national accounts when they fit the characteristics of transactions.
A major revision of the Swedish national accounts in 2007 incorporated illegal activities for the whole time series from 1993 onwards.
Estimates of narcotics were incorporated into the Swedish national accounts as of 29 November 2007.
According to BPM6, illegal transactions need to be treated in the same way as legal transactions.
Sweden is planning to implement calculations for illegal activities in the Balance of payments, in consultation with National accounts; no calculations for illegal activities have yet been implemented in the Balance of payments.

Eurostat guidance: drugs with different areas of use and prices should be studied separately.
Substances distinguished: amphetamines, heroin, cocaine, cannabis, ecstasy and narcotic medicines.
Basic modelling premise: all narcotics used are consumed by households.
Model formula used by the National Accounts:
- Household final consumption expenditure per substance = Price (SEK/gram) x number of addicts x average dose (grams per day of abuse) x number of days of abuse.
Consumption is calculated separately for six drugs: cannabis, heroin, cocaine, amphetamines, ecstasy and narcotic medicines.
Distinction made between “heavy abuse” and “other abuse” in calculating household final consumption expenditure.

Price data source: Swedish Council for Information on Alcohol and Other Drugs (CAN).
Price coverage:
- 1988–2006: price data available for hashish (and to some extent marijuana), amphetamines, cocaine and heroin.
- From the year 2000 and onwards: price data also collected for ecstasy, khat, LSD and GHB.
CAN respondents report “street prices” converted to SEK per gram as appropriate.
For narcotic medicines, price information from the National Criminal Investigation Department is used.
For cannabis, a weighted price is used: 90% hashish and 10% marijuana.

Definition of “heavy abuse”: all abuse via injection (irrespective of substance and frequency) and all daily or almost daily use (irrespective of intake method).
Assumed annual consumption per heavy abuser:
- Amphetamines: 160 grams
- Heroin: 160 grams
- Cannabis: 300 grams
Narcotic medicines: assumed dose of 5 tablets per occasion; number of active days of abuse per year estimated at 200 days, giving annual consumption of 1 000 tablets.
Using the above assumptions and CAN street prices, total consumption is estimated at around SEK 2.7 billion.
“Other users/abusers” defined to include occasional/experimental users and those between occasional use and heavy abuse; information comes from interviews and questionnaire surveys and prior studies (e.g., SOU 1998:18) and Swedish Customs calculations.

Domestic output:
- Domestic manufacture of heroin and cocaine: no indication of production in Sweden.
- Home cultivation of cannabis for own consumption: limited and marginal for total supply.
- Manufacture of ecstasy: considered almost nonexistent.
- Manufacture of amphetamines: considered very small.
- Conclusion: no attempt to calculate domestic output; assumption that all drug consumption in Sweden is supplied through imports.
Intermediate consumption:
- Assumed to be very low and likely partly already covered in the national accounts; no separate estimate made.
Imports:
- Estimated using import prices and estimated amounts consumed, corrected for differences in purity.
- High uncertainty of basic data, especially for imports, prevented satisfactory separate estimation of output, imports and consumption.
- Drugs in transit are excluded from imports and exports.
Exports:
- With no meaningful domestic output, exports can only occur as sales to tourists and are assumed to be very small; no estimates of exports are included.

Introduction of narcotics affects:
- Final consumption expenditure of households.
- Output and value added only to the extent of margins on resales.
Estimates and benchmarks:
- Consumption expenditure of households estimated at SEK 2 847 million in 2001.
- Consumption by heavy users estimated at SEK 2 698 million in 2001.
- Consumption by other users estimated at SEK 149 million in 2001.
Time series from 2002 onwards use partially updated values where applicable.

Consistency required between National Accounts and Balance of payments statistics when including illegal activities.
Imports of drugs affect Balance of payments statistics; some information likely captured in Travel services, especially “foreign exchange for travel”.
Other illegal activities (smuggling of firearms, illegal gambling, counterfeit goods, piracy) may be significant for the Balance of payments but require further investigation.
Current status: narcotics estimates covered in National Accounts only; Balance of payments calculations not yet implemented.

High uncertainty in basic data, particularly for imports, constrains separate estimation of availability and use of drugs in the usual national accounts reconciliation framework.
Some intermediate consumption and import-related effects may already be partly covered in existing national accounts items such as “foreign exchange for travel”.
The principal measurable impact of including narcotics in the Swedish national accounts is on household final consumption expenditure and on margins on resales.