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In addition to a traditional analysis of the breakdown of GDP growth into the contributions of domestic demand and net external demand, it is important to analyse the contribution of each net component of its import share.
In a classic analysis of the contributions to GDP growth, the component of imports of goods and services is usually deducted in its entirety from exports of goods and services for the calculation of net external demand. This breakdown has the disadvantage of discounting total imports from the contribution of exports, thus reducing the contribution of external demand and overestimating the contribution of domestic demand. In fact, imports do not occur exclusively for intermediate consumption in the production of exports, but also, to varying degrees, in the availability of goods and services needed to satisfy the other components of overall demand: private consumption, public consumption, investment. Therefore, it is important to carry out an alternative analysis in which the contribution of each component is calculated on the basis of its value deducted from its imported share. In this way it is possible to obtain a more accurate picture of the true determinants of economic growth, while at the same time allowing a clearer assessment of the impact of the evolution of each component on the evolution of other macroeconomic aggregates, such as the trade balance.
For this exercise it is essential to have information on the content imported from each of the components that make up overall demand. This information is available in the symmetric input-output matrices published by the National Statistical Institute (INE) and allows us to assess, among others, the percentage of each component of overall demand that was met by imports. These imports can be of two types: direct (for example, the import of a good for the direct satisfaction of a need for consumption, investment or export), or indirect (through the import of a good or service that is used as intermediate consumption in the production process of a good that is subsequently used to meet a need for consumption, investment or export). The publication of these matrices is made with irregular periodicity (more recently they have been published every 2 to 5 years), with an extended time lag (the last version was released about 3 years after the reference period). In addition, they are not available for all the years covered by the National Accounts and are not revised when the National Accounts series are retropolated to methodological changes or changes in the base year. The latest available version of these matrices refer to 2017 and were published by INE in April 2020. Prior to this version, there are input-output matrices for the years 1999, 2005, 2008, 2013 and 2015.
Given these limitations, in particular the irregularity with which these matrices are available, a calculation methodology is needed for the values of the contents imported from the various components of overall demand for the intermediate years, for which no information is available. Over the years, fluctuations in the import content of each component of overall demand are expected, although in the short term they are expected to be smaller, to the extent that they will only reflect possible changes in the structure of the components (for example, higher growth in the consumption of durable goods, which usually have a higher import content) and not changes in the import content at the product level, changes that will only occur in the medium to long term. Therefore, it is considered that possible discrepancies between total imports and the result of theoretical imports should be the result of these changes in the structure of overall demand components and should be distributed among them, thus ensuring the identity of GDP in National Accounts. This methodology closely follows the one used by Banco de Portugal [Portuguese Bank] (2017), according to which "percentage changes in the degree of import penetration are considered equal for all components of overall demand".
This explainer is based on the information published in Report 10/2019, "Public Finance: Position and Constraints 2019-2023 (Update)", prepared and published by CFP in October 2019.
Date of last update: 27/11/2023