GDP to be revised upwards

In line with other countries, Norway adheres to the international guidelines on national accounts. These guidelines have recently been updated and include a requirement by the EU's statistical agency, Eurostat, for the European System of National and Regional Accounts 2010 (ESA 2010) to be incorporated into the member states and other EEA countries' national accounts by autumn 2014. Several EU countries have either published or are about to publish updated figures.

Two changes in particular have led to upward revision

The most important changes are that research and development services and major military procurements will now be recognised as investments and not as ongoing operating expenses. For 2011, this means that investments will increase by around NOK 60 billion.

The new accounting method for research and development (R&D) was introduced after a lengthy concerted international effort aimed at improving how R&D is treated in the national accounts. The new method was devised as a result of the desire for comparable data between countries that can be used in analyses of productivity in industry and R&D's role therein. Instead of being classified as a production cost, R&D will now be considered as gross fixed capital formation.

The other change relates to the recording of major military procurements. Earlier guidelines entailed special treatment of the Armed Forces’ procurement of military equipment. This meant that only equipment that could also be used for civilian purposes could be recognised as an investment. In turn, this meant that military weapon systems such as fighter planes, tanks, submarines and missile launching equipment were recorded as production input in the year they were procured, even where such equipment could have a useful life of many years. The amendment to the new international guidelines means that the normal investment criteria now also apply to all military equipment.

Other changes

There will also be other changes associated with this revision, partly as a result of the inclusion of new source material. In Norway, the introduction of new statistics in some areas has led to a downward revision of the gross product. The overall effect on the GDP for 2011 is therefore somewhat smaller than the capitalisation of R&D and military procurements alone would entail.

By way of an example, the results of a new and expanded consumption survey in 2012 were incorporated into the calculations of household final consumption expenditure. The calculations of dwelling services were also revised, based on the last population and housing census from 2011. The result of this new data review is a small downward adjustment of the consumption level.

How are other countries affected?

Introduction of the new guidelines affects each country differently. For many countries, the percentage upward revision of GDP is on a par with the Norwegian revision, while some countries are experiencing a far greater increase. For example, Sweden raised the GDP for 2011 by 5.1 per cent and around 85 per cent of the upward revision was related to the capitalisation of R&D expenditure. The Netherlands revised the GDP upwards for 2010 by 7.6 per cent, where 3 percentage points are connected to the changes in ESA 2010, while the remainder is a result of the incorporation of new source material. In Denmark, the increase in GDP varies between 1.6 and 3.1 per cent in the revision year. The main reason for the upward revision is the change in how R&D is recognised, which in recent years has pushed up the GDP by 2.5 per cent.

Change to mainland Norway content

In connection with the revision of data series in November, the content to be included under mainland Norway is to be modified. Mainland Norway was introduced gradually in the national accounts during the 1970s and 80s but the economy and industry structure has changed since the term was introduced.

Traditionally, the petroleum industry, including services provided to this sector, as well as international shipping and supply activities, has been excluded from the mainland delimitation. Both the so-called "oil services" and supply activities provide their services, not only to the Norwegian shelf, but also globally. Making a clear distinction between what to classify as services related to the petroleum sector and what to classify under other services has proved difficult. We have therefore chosen to include these "oil services" and supply activities under mainland Norway.

The petroleum industries and traditional international shipping are still excluded from the mainland Norway delimitation. This is because the petroleum sector describes the extraction of a resource rent, while traditional international shipping has few Norwegian employees and otherwise has negligible effect on domestic demand.