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Does GNP Mean Gross National Problem? Does GNP Mean Gross National Problem?

Does GNP Mean Gross National Problem? - PowerPoint Presentation

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Does GNP Mean Gross National Problem? - PPT Presentation

Trends and Growth Patterns of Philippine Economy By Fej Billones Grace Salas Bianca Reyes Report Outline Economic Principles GDP GNP Problem Statement Relative Importance of the Problem in Various Developing Countries ID: 816692

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Slide1

Does GNP Mean Gross National Problem?

Trends and Growth Patterns of Philippine Economy

By: Fej Billones

Grace Salas

Bianca Reyes

Slide2

Report Outline

Economic PrinciplesGDP GNP Problem StatementRelative Importance of the Problem in Various Developing Countries

Case Discussion/Recommendation

Goals and Objectives

References

Slide3

I. Economic Principle WHAT IS GDP?

GDP measures output of economic activities within the economic territory of a country.

A higher growth rate means a healthier economy;

a healthier economy means more investments and

a higher employment rate.

Slide4

I. Economic Principle

APPROACHES TO CALCULATING GDP1. Production approach

calculates the GDP based on industrial origin wherein the domestic economy is divided into 3 productive sectors: a) agriculture, fishery, and forestry; b) industry; and c) services.

This approach sums up the value added contribution of each sector to obtain the total contribution to the economy.

2. Expenditure approachsums up personal consumption expenditures of households, government consumption, investment or capital formation, and exports less imports. This approach yields GDP by type of expenditure.

Common sources of these data are household expenditures surveys, retail and wholesale trade surveys, producer surveys, customs records, government accounts, and special surveys done by the statistical

centers

.

Both the production and expenditure approaches must yield the same results of GDP (Table 1). This is because:

Output from

prod’n

of goods + services = total expenditures on goods and services Output (production approach) is either consumed and/or saved (expenditure approach)

Slide5

Nominal GDP: GDP at current pricesReal GDP or GDP at constant prices

inflation adjustment of GDP: adjust the Nominal GDP figure for the increase in prices that occurred from one period to the next

I. Economic Principle

NOMINAL AND REAL GDP

Slide6

Non-productive activities

Goods and services that cannot be measured using market prices. Examples of these are services of housewives, production of illegal gambling such as jueteng, drugs and prostitution.

Informal sector

Refers to the sidewalk vendors and home-based businesses that may opt to understate their income

Also refers to illegal activities gambling and drugsEnvironmental costEnvironment as casualties of development: soil erosion, dying forest because of logging, water pollution because of mining, among others

Social cost

The OFWs earn dollars to meet the needs of their families but their absence has resulted in broken homes and dysfunctional family. GDP is neither a measure of material well-being nor an indicator of welfare.

I. Economic Principle

LIMITATIONS OF GDP

Slide7

Composition of Phil GDP57%

-Services are the biggest sector of the Filipino economy Within services the most important segments are: 70% trade, repair of motor vehicles and household goods (17% of total GDP);

11% real estate, renting and business activities;

8% transport, storage and communication;

7% financial services and 4% public administration, defense

and social security.

31%

-

Industry

accounts:

E

lectronics assembly, garments, footwear, pharmaceuticals, chemicals, wood products, food processing, petroleum refining, fishing

Manufacturing (22 percent of total GDP) and 5% construction

12%

-

Agriculture

Products:

sugarcane, coconuts, rice, corn, bananas, cassava (manioc, tapioca), pineapples, mangoes; pork, eggs, beef; fish

Slide8

I. Economic Principle

HISTORY OF PHILIPPINES’ GDP

Debt-steered growth in the 1970s

Economic growth was decent in the 1970s, averaging at 5.7 percent. But growth in that decade was driven by aggressive foreign borrowings, which were encouraged by multilateral institutions to build up dollars in light of successive oil shocks. The foreign borrowings resulted not only in public spending growth in infrastructure but also in deficits.

Slide9

I. Economic Principle

HISTORY OF PHILIPPINES’ GDP

Sedentary growth in the 1980s

The 1980s was both the “dark

ages”and

“renaissance” in the Philippine economy. Political unrest, economy slid from 5.1 percent in 1980 to 3 percent level to 1.9 percent before it plummeted negative 7.3 percent.

Demise of Ferdinand Marcos thru 1986 EDSA Revolution, rise of Corazon Aquino to power, the economy bounced to 3.4 percent before it reached the respectable 6 percent level.

Last 4 years of 1980 were spent battling foreign debt and restoring investors’ confidence; and framing/ ratifying the new Constitution, fighting military unrest.

Slide10

I. Economic Principle

HISTORY OF PHILIPPINES’ GDP

Recovery in the 1990

Economy averaged 2.8% growth, a rebound from average 2% growth in 1980s. Studded by natural disasters (1990 earthquake, 1991 Mount Pinatubo eruption), power crisis, El Niño and Asian crisis. The economy once again suffered sharp reversals before the end of Cory administration.

But with the Ramos administration’s aggressive effort to rebuild momentum through privatization of government enterprises, more pronounced public-private partnerships and substantial reforms under the Ramos administration.

Deregulations in the sectors of banking, oil telecommunications and airlines also paved the way for more industry players. These efforts paid off as the economy hit 4-percent and 5-percent levels. But in 1997, the economy amid its recovery was interrupted by the Asian crisis. From a high 5.8 percent, the economy slid to negative 0.6 percent.

Slide11

I. Economic Principle

HISTORY OF PHILIPPINES’ GDP

Still a fickle growth in the 2000s

The economy recovered from the Asian crisis in the 2001 as it rebounded to 6 percent. But after the external shock that was the Asian crisis, the economy braced yet another series. First was the fiscal crisis. This resulted from the government’s decision to bail out the National Power Corporation’s debt of P200 billion.

Eventually, the Philippines got “out of the woods” and enjoyed over 5-percent level growth from 2004 to2006. In 2007, the economy posted a 7.2-percent growth, the highest since 1988. But in 2008, the economy was again battered by challenges, the rice and food crisis in first quarter, oil crisis in the second quarter and global crisis in the second quarter.

The economy rebounded by the end of 2009 and it again posted a record high growth of 7.9 percent in the first semester of 2010.

Slide12

I. Economic Principle

PH RANKING IN THE WORLD

Philippines is ranked # 29 in the world in 2014

Slide13

I. Economic Principle

PH RANKING IN THE WORLD

Philippines is ranked # 29 in the world in 2014

Slide14

I. Economic Principle

PH RANKING IN THE WORLD

Slide15

Philippines is ranked # 25 in the world in 2014

I. Economic Principle

PH RANKING IN THE WORLD

Slide16

I. Economic Principle WHAT IS GNP?

GNP (Gross National Product) is the total market value of all final goods and services produced within a given period by factors of production owned by a country’s citizens, regardless of where the output is produced.

GNI (Gross National Income)

is

GNP converted into dollars using an average of currency exchange rates over several years adjusted for rates of inflation. (It uses

Worldbank

Atlas method for the conversion)

Slide17

I. Economic Principle CALCULATING GNP

GNP = GDP + Net factor income from abroad The Expenditure Approach

GDP = C + I + G + (EX - IM)

Where in: C = Personal consumption expenditures (Durable Goods, Non-durable Goods and Services)I = Gross private domestic investment (Nonresidential, residential, change in

business inventories)

G

= Government consumption and gross

investment

EX

= Exports

IM

= Imports The Income ApproachGDP = National Income Where in National Income includes: Compensation of EmployeesProprietor’s incomeRental IncomeCorporate Profits Net Interest Indirect taxes subsidiesNet business Transfer

Surplus/Income of gov’t enterprises

Slide18

I. Economic Principle

CALCULATING GNP

Slide19

GNP is being reported by: Philippine National Statistical Coordination Board.

I. Economic Principle

PH

GNP GROWTH

Slide20

I. Economic PrincipleDifference of GDP and GNP

Slide21

II. PROBLEM STATEMENT

Slide22

II. Problem statement

THE PROBLEM

Is the GNP being used now accurate?

Current Formula:

GNP = GDP + net factor income from

the rest of the world

Slide23

The current GNP computation may not be measuring the real economic value of a country.

II. Problem statement

WHY

IS IT A PROBLEM?

Slide24

II. Problem statement

SUB ISSUES Role of Women Services that working women provide for industry and commerce continue to add to the value of GNP. However, the service of the women in their household is not being accounted for.

Why is it a problem:

GNP is understated due to unaccounted service

Slide25

Public sector vs. Private Sector

Some of the public goods/service tend to be overvalued compared to private goods/service. E.g. expenses of DSWD. Why is it a problem: GNP is overstated

II. Problem statement

SUB ISSUES

Slide26

Military Expenditure

Increasing military expenditure (monetary transactions) add to the GNP however its not productive to the economyWhy is it a problem: GNP is overstated

II. Problem statement

SUB ISSUES

Slide27

Exploitation of irreplaceable resources

The usage of natural resources add up to the GNP. However, depletion of natural resources is not being accounted for. Why is it a problem: GNP is overstated

II. Problem statement

SUB ISSUES

Slide28

Environmental Considerations

The operations by privateindustries/factories add up to the GNP of the country. However, the negative impact on theenvironment is not accounted

for.

Why is it a problem:

GNP is overstated

II. Problem statement

SUB ISSUES

Slide29

III. CASE DISCUSSION

What do you think should be taken off national accounts to arrive at a real measure of progress? Role of Women:

Female Population in PH

Slide30

III. CASE DISCUSSION

Role of Women:

The report does not show the labor being taken by women at home. How can we measure it even?

The house helper can be used as a measurement of calculating the value that these women produce.

Proposed computation:

Monthly salary of helper x multiply by the number of stay home mothers

Slide31

III. CASE DISCUSSION

Public Sector and Private SectorMilitary Expenditure

Gov’t

should only include expenditure with economic impact.

If they add more budget for Defense, its not a guarantee that enemies would decrease. Or worst, the more they add, the more enemies to face.

Benefit is hard to measure

Slide32

III. CASE DISCUSSION

Exploitation of irreplaceable resourcesEnvironmental Considerations

Mineral reserves and the processing time can be identified . There is always corresponding depletion on it.

Firms should measure the “net reserve” to get the real economic value of any irreplaceable resources.

If the main cause of any epidemic disease or any health problem in the area is pollution, the government should less this environmental cost to the actual production done by these manufacturing companies.

E.q

.

Mineral Reserves xx

Depletion

(xx)

Net Reserve

xx _E.q. (for identified health prob)Total Production xxExpenses on impact of the production xxNet of production xx

Slide33

III. CASE DISCUSSION

# 3. Physical Quality of IndexIncludes 3 indicators Life expectancyInfant mortality rateLiteracy

rate

Uses

a scale of 1 to 100

Relates fruits of economic growth with human betterment

Analyzes nature of distribution of income

Does not include social/psychological properties e.g. security, justice & human rights

Need to normalize the indicators

Life

expectancy - measured in terms of years

Infant mortality rate - in terms of per thousand

Basic literacy rate - in terms of percentage.

Slide34

Rank

CountryQuality of Life Index

31

Slovakia

108.74

32

Croatia

108.7

33

Poland

95.19

34

Uruguay

91.94

35

Israel

91.16

36

Italy

90.61

37

Malaysia

89.05

38

Singapore

87.99

39

Mexico

83.47

40

Hungary

83.18

41

Argentina

81.12

42

India

78.01

43

Greece

77.48

44

Bosnia And Herzegovina

74.6

45

Belarus

74.43

46

Hong Kong

73.24

47

Chile

69.32

48

Serbia

69.31

49

Turkey

67.82

50

Romania

63.27

51

Bulgaria

62.6

52

Thailand

56.64

53

Ecuador

42.25

54

Kazakhstan

40.64

55

Jordan

39.54

56

Brazil

38.76

57

Colombia

36.53

58

China

30.3

59

Philippines

28.09

60

Pakistan

22.32

Rank

Country

Quality of Life Index

1

Switzerland

206.23

2

United States

195.55

3

Germany

192.69

4

Sweden

180.92

5

Finland

178.88

6

Denmark

178.55

7

Canada

178.29

8

Australia

175.98

9

United Arab Emirates

173.27

10

Austria

171.82

11

New Zealand

168.56

12

Japan

168.47

13

Norway

168.41

14

Netherlands

160.98

15

United Kingdom

150.97

16

Estonia

145.4

17

Ireland

142.35

18

Kuwait

141.37

19

Saudi Arabia

139.88

20

France

136.31

21

Belgium

134.71

22

Slovenia

125.56

23

Portugal

124.71

24

Puerto Rico

123.64

25

Spain

123.64

26

Czech Republic

122.99

27

Lithuania121.9128South Korea117.929Taiwan114.0630South Africa111.61

PQLI - Philippines is ranked # 59 in the world in 2014

III. CASE DISCUSSION

Slide35

III. CASE DISCUSSION

# 4. A combination of GDP, GNP and PQLI can be used to evaluate the economic welfare of countries.An alternative is to use:Measure of Economic WelfareMEW = Value of GDP + Value of Leisure Time + Value of Unpaid Work – Value of Environmental Damage

Index of Sustainable Economic Welfare

ISEW = Personal Expenditure + Public Expenditure (excluding defense) + Value of Unpaid Work – Private Defense – Value of Environmental Damage

Slide36

IV. Relative importance of the problem in various developing countries

Majority of global growth for the rest of this decade will happen in the developing world!“Emerging markets" have accounted for more than half of world GDP for the first time since two centuries ago. -Financial Times, 2013

Slide37

IV. Relative importance of the problem in various developing countriesDeveloping countries: Demographics

Across Asia demographics variation is significant (% under age 14 : ave

. age)

- Aging Populations: China (17.3% : 36.6), Japan (13.1% : 45.4) , Singapore (13.8% : 33.5), Taiwan (27.3% : 38.1), HK (11.6% : 43.9), Thai land (19.9% : 34.7),

- Growth or Young Populations: Vietnam (25.2% : 28.2), Philippines (34.6% : 23.1), Indonesia (27.3% : 28.5), Malaysia (29.63% : 27.1), Burma (27.5% : 27.2),

Aging Populations

Non-Aging Populations

2013

2027

Source: BIS

Sharpnel

,

Datamonitor,Euromonitor

Slide38

IV. Relative importance of the problem in various developing countries

Global PerspectiveEmerging markets in Asia and Africa still reign supreme: They're at the top of global growth projections over the next two years.

China,

Philippines

, Kenya, India & Indonesia, which together make up about 16 percent of global gross domestic product, are all forecast to grow more than 5 percent in 2015.

Slide39

IV. Relative importance of the problem in various developing countries

GDP may be an inaccurate indicator in the developing (and may still also be the poorest) countries: a concern for policymakers or for anyone who wants to use statistics to help the world’s poorest people -Bill GatesDeveloping countries do not update their reporting often enough, so their GDP numbers may miss large and fast-growing economic sectors, like cell phones

Real progress is not measured accurately

Standard of living may not be in sync with economic growth

Slide40

V. Goals and ObjectivesThe goal is to have an accurate indicator/ measure of a nation’s overall economic value.

GNP measures income, but not equality, it measures growth, but not destruction, and it ignores values like social cohesion and the environment.GNP has to be supplemented with other essential indicators for quality of life/ overall living standards: Childhood and maternal death rates 

Human Development Index

: health and education statistics

Multidimensional Poverty Index : indicators for nutrition, sanitation, and access to cooking fuel and water Purchasing power parity: cost of the same basket of goods and services in different countries

Slide41

VI. REFERENCEShttp://knoema.com/nwnfkne/world-gdp-ranking-2014-data-and-charts

http://www.economicsconcepts.com/physical_quantity_of_life_index.htmhttp://www.preservearticles.com/201107119036/brief-notes-on-physical-quality-of-life-index-pqli.htmlhttp://www.numbeo.com/quality-of-life/rankings.jsphttp://www.economicsonline.co.uk/Global_economics/Measure_of_economic_welfare_MEW.htmlNational Economic and Development Authority. 2006. Statement of Socioeconomic Planning Secretary Augusto B. Santos on the release of the FY 2005 National Income Accounts. January 30. National Statistical Coordination Board. Measurement of gross domestic product. ______. NSCB technical notes. ______.

Virola

, R. 2004. GDP and GNP:

Gawa dito sa Pilipinas and Gawa

ng

Pilipino? Statistically speaking. The Philippine system of national accounts. National Statistical Coordination Board.

http://www.oecdobserver.org/news/archivestory.php/aid/1518/Is_GDP_a_satisfactory_measure_of_growth_.html#sthash.NbHxKhm6.dpuf

http://www.project-syndicate.org/commentary/poor-countries-need-more-accurate-gdp-data-by-bill-gates#Ih63gHTVu31vqmp7.99

http://www.nscb.gov.ph/gender/FS%20on%20WAM%2018mar2013.pdf

http://www.tradingeconomics.com/philippines/gdp-growth-annual