All factors of production which are currently in use in an economy are organized into different individual firms.

Firms which have similar characteristics or common requirements are usually grouped into industries.

In their turn, industries are grouped into sectors, which may be considered as the component parts of an economy.

Broadly speaking, the economy is made up of three sectors: the primary sector, the secondary sector and the tertiary sector.

The primary sector includes all those firms involved in activities directly related to natural resources.

In Malta, farming, fishing and stone quarrying are industries forming part of the primary sector. This sector is the smallest of the three, but it’s importance lies in the fact that all the output has a high local content.

The secondary sector includes all industries involved in the production of all the other goods in the economy, including the processing of those goods produced by the primary sector as well as semi-finished goods. Manufacturing industry and the provision of public utilities are examples of those industries which fall within the secondary sector.

The tertiary sector includes all private sector and public sector services. While private sector services include industries such as insurance, banking, retailing and real estate, public services include all the measured output of government departments and government agencies.

For national accounting purposes, Malta considers the component sectors as being made up of Direct Production, Market Services and Non-Market Services.

Direct production is made up of all those industries in the primary and secondary sectors. Direct production therefore deals with the production of goods.

The tertiary sector is divided into two sub sectors. Market services include all private sector services while non-market services include all public sector services, referred to as public administration.

The Gross Domestic Product from the Income Side

The Gross Domestic Product (GDP) is the broadest indicator of economic output and growth. It covers the goods and services produced and consumed in the private, public, domestic, and international sectors of the economy.

Traditionally, Malta compiles two out of the three established measures of GDP, i.e. the Income Approach and the Expenditure Approach. The National Statistics Office (NSO) has never compiled the third, the Production or Output Approach, although this is currently under preparation.

Thus, the first measure is provided from the viewpoint of supply that shows the resource costs in producing the goods and services, and the other from the viewpoint of demand, showing the market for goods and services.

The two measures are conceptually equal, but they differ statistically because in reality perfect data is never available. Moreover, there are no estimates of sampling error for GDP figures.

The statistical discrepancy indicates the extent to which unknown errors in the data bases do not cancel each other. The Income Approach is used to measure and establish the level of the GDP at factor cost, by industry and type of income, while the Expenditure Approach provides the final uses.

The inevitable discrepancy that arises from these two approaches is always shown on the expenditure side. This is composed of inventory changes and a residual error.

The GDP, as measured from the Income Approach, is the aggregate of ten industries. The income in respect of each industry is made up of three components, namely, income from employment, self-employment and other trading income (operating surplus).

The estimates of income from employment represent the wages and salaries earned by both full-time and part-time employees, before the deduction of the corresponding income tax and social security contributions. The earnings figure includes overtime, allowances and bonuses.

Employers’ contributions to social security are regarded as supplements to wages and salaries and are also included. As GDP is compiled on a quarterly basis, the number of employees used is the average for a given quarter.

On the other hand, the estimates of income from self-employment and other trading income represent the net profit before income tax, gross of consumption of fixed capital (depreciation). Profits arising from extraordinary income and dividends are excluded.

In estimating the Income Approach to the GDP, a wide array and range of sources are used by the NSO. These include the accounting statements of Government and other public and private sector bodies, and a number of specific censuses and surveys covering most sectors of the economy.

In areas where the available sources or information are either lacking or incomplete, use is made of the employment statistics as compiled by the Employment and Training Corporation (ETC).

However, preliminary estimates compiled by NSO indicate that the GDP at factor cost for the first nine months of 2000 and this year will have to be revised downwards by around Lm0.3 million and Lm1.7 million respectively as a result of the revision in ETC labour statistics.