The data on national expenditures in local currency provided by the participating economies are essential to the ICP comparison. First, they are used as weights to aggregate PPPs through the various levels of aggregation up to GDP. Second, they are ultimately deflated by the PPPs and expressed as PPP-based expenditures.
Expenditure data compilation
Economies are expected to estimate their GDP for the reference year in line with SNA 2008 and to disaggregate this GDP estimate into the relevant expenditure components identified in the ICP expenditure classification.
At the lowest level of the classification, the expenditure components are termed basic headings. The classification breaks down the expenditure on final goods and services into 155 basic headings that comply with the functional and product classifications of SNA 2008 and are the building blocks of the ICP comparison. They are the level at which expenditures are defined and estimated, items are selected for pricing, and prices are collected. Basic headings are the level at which PPPs are first calculated.
In principle, a basic heading consists of a group of similar well-defined goods or services. In practice, a basic heading is defined by the lowest level of final expenditure for which the participating economies can estimate explicit expenditures.
Expenditure data validation
Validation procedures are an iterative process carried out at the national, regional, and global levels to ensure data quality and comparability across all participating economies.
National accounts data validation requires three stages: first, intracountry validation carried out by the individual participating economies; second, intercountry validation carried out at the regional level; and third, interregional validation carried out at the global level.
Before the national accounts expenditure data are sent to the regional offices, basic edits are carried out by the national implementing agencies. These include:
• Ensuring SNA compliance, including data completeness, applicability of positive and negative values, and additivity
• Ensuring the correct estimation of financial intermediation services indirectly measured (FISIM), net purchases abroad, and nonprofit institutions serving households (NPISHs).
Furthermore, an economic plausibility assessment, such as verifying per capita basic-heading expenditures and basic-heading shares of GDP, should also be conducted.
The validation edits carried out at the national level are repeated at the regional level. The aim of the regional validation is to compare the consistency of data from similar economies within a region. The regional implementing agency identifies clusters of economies based on their economic similarities. GDP per capita estimates from previous years serve as a key indicator of the cluster to which an economy should be allocated.
The global comparison of PPP-based expenditures (and their per capita equivalents) is achieved by linking regional results to form a global set of results. At the global level, the same intracountry validation processes as previously defined are followed. The intercountry validation process is also followed across economies and within and between regions.