Quality report concerning statistics underlying the Macroeconomic Imbalance Procedure (MIP) indicators level 3 Balance of Payments and the International Investment Position Statistics Reporting institution: EESTI PANK (Bank of Estonia) 1. INSTITUTIONAL ENVIRONMENT 1.1. CoP1 Professional Independence / PC1 Professional Independence 1.1.1 Legal basis Article 3 of the Bank of Estonia (Eesti Pank) Act, which is available on the Bank s website (Bank of Estonia Act), says that: (1) The Bank of Estonia operates independently of other government agencies. The Bank of Estonia reports on its activities to the Riigikogu and is not subordinate to the Government of the Republic or any other executive agency of the government or to any third party. (1 1 ) When performing the functions of the European System of Central Banks, the only body from which the Bank of Estonia and members of its governing bodies may request and receive instructions for execution is the European Central Bank. Article 2 of the same law stipulates that the aims and functions are also: 6) to compile the balance of payments of Estonia; 7) to collect and publish the statistics necessary for the performance of its functions. Article 8 of the Official Statistics Act, which is also available on the Bank s website (Official Statistics Act), says that: (1) The producers of official statistics are Statistics Estonia, and Eesti Pank to the extent provided for in subsection 34 (1) of the Eesti Pank Act. (3) The producers of official statistics shall be independent in their choice of statistical methodology but shall coordinate the methodology within the limits of their competence. Any amendments to the methodology shall also be coordinated. The independence of the Bank of Estonia, in its capacity as a member of the ESCB, is further emphasised in Article 130 of the EU Treaty and Article 7 of the Statute of the ESCB and of the ECB, which stipulate that when exercising the powers and carrying out the tasks and Page 1 / 10
duties conferred upon them, neither the ECB nor a national central bank nor any member of their decision making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body. The Community institutions and bodies and governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision making bodies of the ECB or of the national central banks in the performance of their tasks. 1.1.2. Statistics work programme Under Article 4 of the Official Statistics Act, the official statistical programme is compiled each year for the following five years to suit the national or international demand for statistics. The official statistical programme is approved by an order of the Government of the Republic. The statistical work programme of the Bank of Estonia is part of the official statistical programme and is approved by a decree of the Governor of the Bank of Estonia. The statistical work programme of the Bank of Estonia is made public on the Bank s website (see List of statistical actions of Eesti Pank under the official statistical programme). 1.2. CoP2 Mandate for data collection / PC2 Mandate for data collection 1.2.1 Allocation responsibilities Collecting, processing, and disseminating the Estonian balance of payments and international investment position statistics is the full responsibility of the Bank of Estonia. 1.2.2 Legal basis The statistical activity of the Bank of Estonia for the balance of payments and international investment statistics is defined by two laws, the Bank of Estonia Act and the Official Statistics Act. Article 34 of the Bank of Estonia Act on the compilation of the balance of payments stipulates that: (1) Given the competence of the European Central Bank and of the European System of Central Banks and in order to obtain and publish the monetary, financial and balance of payments statistics necessary for the performance of its functions, the Bank of Estonia collects data on the basis and following the procedure provided in the Official Statistics Act. [RT I 2010, 22, 108 - entry into force 01.01.2011] (2) The Bank of Estonia is entitled to obtain, free of charge, the information necessary for drawing up the nation s balance of payments from all agencies of the government and of local authorities and from any person who, in the territory of Estonia, conducts cross-border economic transactions. [RT I 2006, 29, 219 - entry into force 08.07.2006] Article 8 of the Official Statistics Act says that: Page 2 / 10
(1) The producers of official statistics are Statistics Estonia, and Eesti Pank to the extent provided for in subsection 34 (1) of the Eesti Pank Act. 1.3. CoP6 Impartiality and objectivity / PC6 Impartiality and objectivity 1.3.1 Advance release calendar An advance release calendar for the next year is made available to the public on the Bank s website no later than 30 September for the forthcoming year; see the release calendar. The monthly balance of payments is disseminated with timeliness T+ 44 calendar days and quarterly balance of payments / international investment position / gross external debt with timeliness T+70 calendar days. 1.3.2 Revision policy The Bank of Estonia and Statistics Estonia use the same principles for revising statistics, and these are in line with the principles of the revision policy recommended by the European Commission and the European Central Bank. The revision policy is harmonised for the external sector statistics and the sub-accounts of the national accounts (GDP, external sector financing statistics, and the quarterly and annual non-financial and financial accounts). Revisions can be regular or extraordinary: Regular revision (generally to accommodate new or corrected data or other additional information): o when the statistics for Q1 and Q3 are first published, the statistics for the preceding quarter only are adjusted; o when the statistics for Q4 are first published, the statistics for Q1, Q2 and Q3 of the same year are adjusted. If necessary, the quarters of the previous two years may also be corrected, making up to 11 quarters in total; o when the statistics for Q2 are first released, the data for Q1 and all the preceding quarters for which there are additional data are revised, for up to 17 quarters in total. o after the completion of the quarterly balance of payments, the monthly balances of payments for that quarter are revised so that the total of the items in the balance of payments for the three months is equal to the total of the same items in that quarter s balance of payments. Extraordinary revision: o in exceptional cases, when significant errors or omissions have occurred, the data for earlier quarters affected may be revised when new data are released; o if the methodology or the data collection system changes, data from earlier periods can be adjusted as far back as possible when new data are released; o extraordinary changes are announced publicly in press releases and on the website. Page 3 / 10
The principles for the dissemination and revision of balance of payments statistics are available on the Bank s website (Revision policy). 2. STATISTICAL PROCESSES 2.1 CoP7 Sound methodology / PC7 Sound methodology 2.1.1 General remarks The balance of payments statistics for Estonia follow the IMF s BPM6 methodology and the European legal framework applicable for BOP/IIP statistics (Commission Regulations 184/2005 amended by Regulation 555/2012 and ECB Guideline 2011/23). The first publication of monthly data in BPM6 was for April 2014 published in June 2014; the BOP quarterly report for Q1 2014 / annual report for 2013 was published in June 2014. Since 2013, detailed BPM6 data are available from relevant data sources. BPM6 back data for the monthly BOP starting from January 2008, for the quarterly BOP from Q1 1993, and for the international investment position and gross foreign debt from Q1 1996, are available on the Bank s website (Data). A presentation of the methodology and data sources for the Estonian BOP/IIP is available on the Bank of Estonia website (Methodology). Information on the sources and methodology used for the Estonian BOP and IIP can also be found in the ECB BOP book (to be updated in 2015), and also in the IMF s Balance of Payments Statistics Yearbook (BOPSY) and within the metadata description of the IMF's SDDS (IMF SDDS). 2.1.2 Residency Estonian balance of payments and international investment position statistics follow the BPM6 residency concepts. 2.1.3 Institutional unit definition Resident institutional units are defined in conformity with BPM6 as those that have a centre of predominant economic interest in Estonia. 2.1.4 Sectorisation and sector definition and delimitation The definition and delimitation of institutional sectors follow the practice of the BPM6 and Estonian national accounts. 2.1.5 Valuation The general principle is to apply market values or the best available proxies. Loans and deposits are recorded at nominal value. For direct investments, the value of reinvested earnings is derived from the consolidated profit or loss of the entity (the rest of the items are Page 4 / 10
non-consolidated), and the COPC concept is applied. Market values are used for transactions and positions in the equity of listed companies, and the difference between transactions and any change in positions is recorded as a change in value. For unlisted companies, the actual transaction price is used, and own funds at book value (OFBV) is used for positions. Where the actual transaction price of the equity of unlisted companies is unknown, the nominal value is used as a proxy. The transactions recorded in the financial account for equity shares of unlisted companies may differ from the own funds at book value recorded in the IIP. Such differences are recorded as revaluations due to other price changes. Transactions in foreign currency are converted to euros using the exchange rate applicable at the time the transaction took place. 2.1.6 Time of recording (accrual accounting) In general, the accrual principle applies in the Estonian balance of payments statistics for the time of recording. Data supplied by the respondents to balance of payments surveys are typically based on business accounting records, and are considered to be close approximations to the accruals principle. If book-keeping data are not readily available, estimates may be provided. 2.1.7 Coverage gaps No transactions and no geographic regions are excluded. However, external transactions and the financial stocks of resident households are only partially covered, though the impact on the BOP and IIP is very small. 2.2 CoP8 Appropriate Statistical procedures / PC8 Appropriate Statistical procedures 2.2.1 Main features Estonia uses a combined system to compile the quarterly balance of payments. Two parallel databases, one using the settlements system (ITRS) and one the survey system, complement each other and facilitate the identification of errors. The databases are used in combination with administrative information to ensure higher quality for the balance of payments statistics (the balance of payments, the international investment position and external debt), which is usually quite difficult to achieve in highly open economies with low concentration. In addition to the monthly reports of the central bank, credit institutions and the general government, official foreign trade statistics, and mobile positioning information on the movement of tourists, the settlements system is used together with various econometric models to compile the flash estimates of the monthly balances of payments. Since 2014, three different surveys have been used to collect quarterly data from approximately 3,000 companies. The settlements system involves approximately 150,000 transactions a year that are significant for the compilation of the balance of payments. Data on these transactions are received through an open system where the central bank gets information only on the debit or credit side of the foreign payment order. Only the payments Page 5 / 10
of bank customers are submitted. Banking sector transactions recorded in the balance of payments are based on the banks balance sheets, income statements and other financial reports. In addition, information is obtained from multiple other channels: official trade statistics, the Central Register of Securities, the Financial Supervision Authority, surveys conducted by Statistics Estonia, the Ministry of Justice Centre of Registers, real property price statistics from the Estonian Land Board, accounting registers in the Bank of Estonia, government institutions, the Centralised Securities Database of the ESCB and so forth. Moreover, statistical surveys are conducted, assessments made and econometric models applied. The monthly balance of payments uses the same methodology as the quarterly balance of payments. Whereas the quarterly balance of payments is compiled using a representative combined system of sources including company surveys, the monthly balance of payments relies on a much narrower information base. Even though maximum use is made of the available information on the reporting month such as reports of international payments and administrative sources of information, estimations play a considerable role. Estimates derived from statistical models make use of many indirect economic indicators or the annual changes in them. After the quarterly balance of payments is compiled, the monthly balance of payments is adjusted so that the sum of the entries of three monthly balances of payments is equal to the total sum of the entries for the quarterly balance of payments. The following sources of information are used for the main entries of the monthly balance of payments: foreign trade data from Statistics Estonia; reports from credit institutions; the accounting registers of the Bank of Estonia; a report by the Ministry of Finance on the use and servicing of state loans and the use of money received from the structural funds of the European Union, and reports on contributions paid to the European Union budget; information from local governments on changes in loan liabilities; data from the Centralised Securities Database of the European System of Central Banks (ESCB) on the securities claims of Estonian investors; data from the Estonian Central Register of Securities on residents liabilities to foreign investors; estimates of the mobility of tourists based on mobile positioning and data from sample surveys on the average expenditure by tourists; data collected in the international transaction reporting system (ITRS) of credit institutions; the media, principally news agencies and the press. The annual balance of payments is the sum of the four quarterly balances of payments of the year. Page 6 / 10
2.2.2 Country specific aspects More specific remarks on the statistical techniques used for compiling the Estonian BOP, IIP and Gross External Debt can be found in the SDDS metadata (Metadata) and on the Bank s website (Methodology). 3. STATISTICAL OUTPUT 3.1 CoP11 Relevance / PC11 Relevance The BOP and IIP are transmitted to the ECB and Eurostat for the compilation of euro-area and European Union aggregated statistics. They are also disseminated at international level in accordance with the SDDS, and are used for the purposes of IMF Article IV reviews, for the risk dashboard of the European Systemic Risk Board (ESRB) and for the scoreboard of the EU s macroeconomic imbalance procedure (MIP). At national level the BOP is used as an input for the compilation of the National Accounts by Statistics Estonia. At national level, the Statistics Department of the Bank of Estonia regularly contacts major users inside the bank in order to be aware of new and emerging national needs, to discuss priorities, and to receive feedback. A regular review of the users of various statistical tables on external sector statistics presented on the Bank s website is carried out. On certain occasions, the Bank of Estonia has conducted user surveys that are addressed to a wider range of users, including researchers, government institutions and the media among others. 3.2 CoP12 Accuracy and reliability / PC12 Accuracy and reliability (including stability) 3.2.1 Revisions Revisions and other accuracy and reliability elements are integrated in the regular quality reports (QR) produced by the ECB and Eurostat. A revision study is also performed by the Bank of Estonia once a year (except for the years 2014 and 2015 because of the change over to the BPM6). The study is available on the Bank s website in Estonian only (see QR). These studies show the revisions to the main accounts of the current account, the goods and services accounts, not to be large. The MAPE for goods is less than 1%, and that for services around 2%. The MAPE is larger for primary and secondary income due to reinvested earnings and transfers from EU funds. The investment income and transfers from the EU funds are nearly always the subject of later adjustments because no actual figures are available at the moment the BOP is compiled. The cause of significant revisions to direct investment income is reinvested earnings (RIE); the proportion of RIE in DI income is very high at up to 70-90%, because no corporate income tax is applied. Estimates are initially used for EU transfers, and they are later revised to match additional information received from the Ministry of Finance. Page 7 / 10
The RMSRE used to measure the size of revision for the direct investment account is around 5-6% and it is influenced mostly by the revision of reinvested earnings. The RMSRE for portfolio investment is around 2% and for other investment 6%. 3.2.2 Errors and omissions and integrity rules According to the Eurostat QR 2015 the average relative error (ARE) is less than the threshold for the EU28. The quarterly errors and omissions have tended to be positive during recent years and the Bank of Estonia is monitoring the problem. The consistency with integrity rules is classed by the Eurostat QR 2015 as excellent for the monthly and quarterly BOP, quarterly IIP, quarterly revaluations, ITS and FDI positions, and as good for FDI flows. 3.3 CoP13 Timeliness and punctuality / PC13 Timeliness (including punctuality) 3.3.1 National requirements There is no national requirement for timeliness. To achieve higher consistency with the national accounts compiled by Statistics Estonia, the Bank of Estonia publishes the quarterly BOP (together with the IIP and Gross External Debt) with the same timeliness as the national accounts of T+70 calendar days. The monthly BOP is disseminated with the timeliness of T+44 calendar days. The advance release calendar is available on the Bank s website (Calendar). 3.3.2 EU and other international requirements Estonia meets all the timeliness requirements from international institutions like the ECB, Eurostat, the IMF, the World Bank, the OECD and the BIS. Estonia is also a subscriber to the IMF Special Data Dissemination Standard (SDDS). 3.4 CoP14 Coherence and comparability / PC14 Consistency and comparability 3.4.1 Bilateral asymmetries The results of the Eurostat BOP Quality Report show that bilateral asymmetries exist but in most cases the absolute discrepancies are insignificant. The value reported by the Bank of Estonia is usually higher than that reported by the partner country and this should indicate that the Bank of Estonia data have better coverage. The Bank of Estonia also participates in the joint Eurostat/ECB FDI network but because the economy is small there are usually no such big FDI transactions to reconcile with partner countries. Page 8 / 10
3.4.2 Consistency with related statistics The differences between official foreign trade data and the BOP goods account can be explained by the methodological adjustments to foreign trade data made by the Bank of Estonia in order to comply with BOP concepts (for more details see external sector statistics definitions and explanations). With the implementation of BPM6 and ESA 2010 in 2014, the Estonian balance of payments and national accounts are conceptually consistent. From 2015 the Bank of Estonia and Statistics Estonia are applying a harmonised revision policy for the BOP and national accounts statistics and there should not be any more vintage issues due to differences in revision policies. Consistency with financial statistics is also considered. Portfolio investment and SHS use the same data collection and are consistent. 3.4.3 Time and back data consistency Back data of the balance of payments compiled under the BPM6 methodology are available from 1993Q1 onwards. The time-series of the international investment position and gross external debt are available from 1996Q1, and for the monthly balance of payments from January 2008 onwards. Since 2013 detailed BPM6 data are available from the relevant data sources and BPM5-BPM6 bridging was made for previous years, following the conversation matrix of the ECB, on the basis of BPM5 components that were converted into BPM6. 3.4.4 Consistency across frequencies The Estonian annual BOP is derived by aggregating quarterly data. After the completion of the quarterly balance of payments, the monthly balances of payments for that quarter are revised so that the total of the items in the balance of payments for the three individual months is equal to the total of the same items in that quarter s balance of payments. Generally, the underlying concepts, definitions and classifications are therefore identical across series of differing periodicity. 3.5 CoP15 Accessibility and Clarity / PC15 Accessibility and Clarity 3.5.1 Data The Bank of Estonia only releases statistics electronically on its website http://www.eestipank.ee. Balance of payments data covering all transactions with the rest of the world are disseminated mainly in the form of various tables. The tables are illustrated with charts (one per table). News releases Simultaneously with the quarterly data dissemination, three short press releases are disseminated; one concentrates on developments in the current and capital accounts, another on the financial account and the international investment position, and the third gives an overall macroeconomic view. Simultaneously with the monthly BOP data dissemination, a Page 9 / 10
short comment is also released. Press releases can be accessed on the Bank s website (Press releases and publications). Publications The Balance of Payments Yearbook gives a comprehensive analysis of the balance of payments statistics with various tables and charts and a detailed description of the methodology (see previous link). 3.5.2 Metadata Metadata can be found under the following links: The Bank of Estonia website Methodology. It is planned to improve the presentation of metadata on the website by the end of 2015 so as to make the process more user-friendly. Balance of Payments Yearbook IMF SDDS metadata for the quarterly balance of payments, international investment position and external debt IMF SDDS metadata. The IMF s Balance of Payments Statistics Yearbook (BOPSY) Page 10 / 10