Statistics Indonesia

Concept
Methodology
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Glossary

The Concept of National Income
The important economic indicator for a certain period and country is Gross Domestic Product (GDP) both at current and constant prices. GDP is defined as total value added created by all economic unit in a certain country, or total final goods and services produced by all economic units. The GDP at current prices shows the value added of goods and services at current prices for a certain year, while the GDP at constant prices shows the value added of goods and services calculated at fixed prices of a base year. The base year used in this publication is 2000, which are reflected the most current Indonesian economic structure. Another reason of using 2000 as a base year is based on the availability of the Indonesian Input-Output Table 2000.
The GDP at current prices has advantages in presenting economic structures, while the GDP at constant price for knowing economis progress.

There are three approaches in estimating GDP, namely :
1. Production approach
  In this approach, GDP is defined as the total value added of all production units in a certain country for a certain period (usually one year). The production units in this publication are grouped into 9 sectors of industrial origin, namely :
  - Agriculture, Livestock, Forestry and Fishery
  - Mining and Quarrying
  - Manufacturing
  - Electricity, Gas and Water Supply
  - Construction
  - Trade, Hotel and Restaurant
  - Transport and Communication
  - Finance, Real Estate and Business Services
  - Services including services provided by government. Each sector is further divided into sub-sectors.
2. Income Approach
  GDP in this approach is defined as the totalof compensations to production factors used in producing goods and services in a country and for a certain period (usually one year). The compensations consist of wages, land rate, capital interest and profits, all of them are before taxes. By this definition, GDP includes depreciation and net indirect taxes.
3. Expenditure approach
  By this approach GDP is defined as total components of final demand, namely :
  - Final consumption expenditures of household and private non-profit institutions serving households (NPISHs)
  - Government final consumption expenditure
  - Gross domestic fixed capital formations
  - Change in inventories, and
  - Net export (the net refers to export minus impor).
  Conseptually, these three approaches should give the same results, so total expenditure should be equal to total final goods and services, and should also be equal to total income of production factors. GDP resulted from those methods is called as GDP at market prices, since net indirect taxes are already included.
  
  GDP could also be used in deriving other economic indicators such as :
  1. Gross National Product
    that is GDP plus net income from abroad. The term net here refers to the income of production factors (labor and capital) received by Indonesian resident from abroad minus income paid to non resident.
  2. Net National Product at current prices
    which is Gross National Product minus depreciation of capital goods used in production process for a year.
  3. Net National Product at factor cost
    is defined as the product at current prices minus net indirect taxes. The term net is the indirect taxes minus government subsidies. The indirect taxes and subsidies are levied on goods and services produced or sold. The indirect taxes affect in increasing prices, where as the subsidies conversely. The Net National Product at factor cost is well known as National Income.