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
Slide2Report Outline
Economic PrinciplesGDP GNP Problem StatementRelative Importance of the Problem in Various Developing Countries
Case Discussion/Recommendation
Goals and Objectives
References
Slide3I. 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.
Slide4I. 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)
Slide5Nominal 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
Slide6Non-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
Slide7Composition 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
Slide8I. 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.
Slide9I. 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.
Slide10I. 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.
Slide11I. 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.
Slide12I. Economic Principle
PH RANKING IN THE WORLD
Philippines is ranked # 29 in the world in 2014
Slide13I. Economic Principle
PH RANKING IN THE WORLD
Philippines is ranked # 29 in the world in 2014
Slide14I. Economic Principle
PH RANKING IN THE WORLD
Slide15Philippines is ranked # 25 in the world in 2014
I. Economic Principle
PH RANKING IN THE WORLD
Slide16I. 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)
Slide17I. 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
Slide18I. Economic Principle
CALCULATING GNP
Slide19GNP is being reported by: Philippine National Statistical Coordination Board.
I. Economic Principle
PH
GNP GROWTH
Slide20I. Economic PrincipleDifference of GDP and GNP
Slide21II. PROBLEM STATEMENT
Slide22II. Problem statement
THE PROBLEM
Is the GNP being used now accurate?
Current Formula:
GNP = GDP + net factor income from
the rest of the world
Slide23The current GNP computation may not be measuring the real economic value of a country.
II. Problem statement
WHY
IS IT A PROBLEM?
Slide24II. 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
Slide25Public 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
Slide26Military 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
Slide27Exploitation 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
Slide28Environmental 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
Slide29III. 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
Slide30III. 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
Slide31III. 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
Slide32III. 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
Slide33III. 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.
Slide34Rank
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
Slide35III. 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
Slide36IV. 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
Slide37IV. 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
Slide38IV. 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.
Slide39IV. 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 GatesDeveloping 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
Slide40V. 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
Slide41VI. 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