Total Economy (S) :

The total economy is the entire set of resident institutional units.

Institutional Units :

An institutional unit is an economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities.
The main attributes of an institutional unit can be described as follows:
It is entitled to own goods or assets and is able to exchange the ownership of goods or assets in transactions with other institutional units.
It is able to take economic decisions and engage in economic activities for which it is itself held to be directly responsible and accountable by law.
It is able to incur liabilities on its own behalf, to take on other obligations or future commitments and to enter into contracts.
It can have, or it is able to compile a complete set of accounts (a balance sheet and current accounts).

Classification of Institutional Sectors :

The system recommends grouping resident institutional units of the national economy into five main institutional sectors, in addition to the rest-of-the-world sector. These are:

Non- Financial Corporations Sector (S.11) :

This include all resident corporations or quasi-corporations whose principal activity is the production of market goods or non- financial services. The non-financial corporations sector is composed of the following set of resident institutional units:
All resident non-financial corporations.
All resident non-financial quasi-corporations including all branches of foreign-owned non-financial enterprises that are engaged in production on the economic territory on a long-term basis.
All resident non-profit institutions (NPIs) that are market producers of goods or non-financial services.

The non- financial corporations sector is divided into three sub-sectors subject to ownership and control. These are:

a- Public non-financial corporations.
b- National non-financial private corporations.
c- Foreign controlled non-financial corporations.

Financial Corporations Sector (S.12) :

Financial corporations consist of all resident corporations or quasi-corporations principally engaged in financial intermediation or in auxiliary financial activities closely related to financial intermediation. Also, it includes non-profit institutions that are market producers of financial services. Hence, it comprises all enterprises whose main economic activity were classified in sections 65, 66 and 67 of the International Standard Industrial Classification of all Economic Activities, rev 3.1.

The financial sector is divided into the following sub-sectors:

A- Central Bank :

It is an independent institutional unit that regulates or supervises financial corporations. It is the public monetary authority, i.e., issues banknotes and coins and it may hold all or part of the international reserves of the country as well as government deposits.

B-Other Depository Corporations:

This consists of all resident financial corporations and quasi-corporations, except the central bank, whose principal activity is financial intermediation, e.g., commercial banks, specialized banks (agricultural, industrial, estate, …. etc).

C-Other Financial Intermediaries Except Insurance Corporations and Pension Funds:

This sub-sector consists of all resident corporations and quasi-corporations primarily engaged in financial intermediation except depository corporations, insurance corporations and pension funds, e.g., financial leasing, projects finance, hire purchase…etc).

D-Financial Auxiliaries:

This sub-sector consists of all resident corporations and quasi- corporations engaged primarily in activities closely related to financial intermediation but which they do not themselves perform: brokers, loan brokers, floating corporations, exchange corporations, financial consultations.

E-Insurance Corporations and Pension funds:

This sub-sector consists of resident insurance corporations and quasi- corporations and autonomous pension funds.

F- Financial Intermediation:

Financial intermediation is a productive activity in which institutional units incur liabilities on their own account for the purpose of acquiring financial assets by engaging in financial transactions in the market. The role of financial intermediaries is to channel funds from lenders to borrowers by intermediation between-them. They collect funds from lenders and transform, or repackage, them in ways that suit the requirements of the borrowers. They use these funds to acquire financial assets, principally by making advances or loans to others.

General Government Sector (S.13):

This sector consists of the institutiional units of the central government, state government and local governments. It also includes social security funds controlled by governmental units as well as non-market non- profit institutions that are controlled and mainly financed by government units. Government units are legal entities established by political processes which have legislative, judicial and executive authority over other institutional units. The principal functions of government are to assume responsibility for the provision of goods and services to the community or to individual households and to finance their provision out of taxation or other incomes, to redistribute income and wealth by means of transfers and to engage in non-market production.

Government Final Consumption Expenditure this expenditure may be divided into:

Government expenditure on individual consumption goods and services.
Government expenditure on collective consumption services (or actual final consumption of general government) derived from final consumption expenditure by subtracting expenditure on individual consumption.

The Household Sector (S.14):

The household sector consists of all resident households in addition to unincorporated enterprises owned by households, whether market producers or producing for own final use.

Household :

A household is a small group of persons who share the same living accommodation, who pool some or all of their income and wealth and who consume certain types of goods and services collectively, mainly housing and food. Production within the household sector takes place within enterprises that are directly owned and controlled by member of households, either individually or in partnership with others
These are refered to as unincorporated enterprises.

Domestic Servants:

These are servants or other paid employees who live in the same permises as their employes. They do not form part of their employer’s houseold even though they may be provided with accommodation and meals as remuneration in kind. Paid domestic employees have no claim upon the collective resources of their employers’ households.

The Non- Profit Institutions Serving Households Sector (S.15):

These are legal and social entities created for the purpose of producing non-market goods and services for households (free or at prices that are not economically significant to make profit).
The main resources of these non-profit institutions are voluntary contributions by households
They produce services for the benefit of individuals. They are controlled by a group of officers elected by voting.

The Rest-of-the-World Sector (S.2):

This consists of all non-resident institutional units that enter into transactions with resident units, or have other economic links with resident units. The rest of the world includes certain non-resident institutional units that may be physically located within the geographic boundary of the country, e.g., embassies, military bases, international organizations, …etc.

Residence:

An institutional unit is considered as resident in a country when it has a center of economic interest in the economic territory of that country. It is said to have a center of economic interest when there exists some location-dwelling, place of production or other premises within the economic territory inn which it is engaged and intends to continue to engage in economic activities and transactions over a long period of time (one year or more). Thus, residence is not based on nationality or legal criteria. All members of the same household have the same residence as the household itself, even though they may cross borders to work or otherwise spend periods of time abroad. If they work and reside abroad so long that they acquire a center of economic interest abroad, they cease to be members of their original household. Corporations and non-profit institutions may normally be expected to have a centre of economic interest in the country in which they are legally constituted and registered. The Economic Territory of the Country: The economic territory of a country consists of the geographic territory administered by government within which persons, goods and capital circulate freely, it includes
- Territorial waters
- Airspace
- Territorial enclaves in the rest of the world, e.g., embassies, consulates, military bases,…etc.

Centre of Economic Interest:

An institutional unit is said to have a centre of economic interest within a country when there exists some location- dwelling, place of production, or other premises within the economic territory of the country in which it engages in economic activities and transactions over a long period of time (one year or more).

Productive Activity:

Production consists of a set of activities. The activity is classified by type of goods and services produced as outputs according to the 3rd revision of the Iinternational Standard Industrial Classification of All Economic Activities (ISIC, rev. 3.1).

Establishment:

Establishment is an enterprise or part of an enterprise that is situated in a single location in which a principal activity is carried out. There might be other secondary activities.

Principal activity:

The principal activity of a producing unit is the activity whose value added exceeds that of any other activity carried out within the same unit.