Economic Growth

• An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.

• For comparing one country's economic growth to another, GDP or GNP per capita should be used as these take into account population differences between countries.

Economic Growth

• associated with technological changes• most watched economic indicator• tells how much more the economy is producing than it did

before

Economic Growth

TWO TYPES OF ECONOMIC GROWTH

Economic Growth

Actual Growth• percentage annual increase

in national output and is also known as the ‘GDP’ (Gross Domestic Output). This is said to be the rate of growth in actual output produced. Statistics of GDP growth rates refer to actual growth when they are published

Potential Growth• how quickly the economy

could grow. It is known as the percentage annual increase in the economies capacity to produce

Economic Growth

Affecting Factors:

• Productivity Increases• Demographic Changes e.g. Increase in population

Age and Gender of Workforce• Technology

Economic Growth

• How is Economic Growth Measured?

- by Gross Domestic Product or GDP.

Economic Growth

Gross Domestic Product – GDP

- the monetary value of all the finished goods and services produced within a country's borders in a specific time period.

- includes all private and public consumption, government outlays, investments and exports minus imports that occur within a defined territory.

- usually calculated on an annual basis, it can be calculated on a quarterly basis as well

- measurement of a nation’s overall economic goods and services offered.

Economic Growth

Gross Domestic Product – GDP

+X% -annual percentage change in Real GDP(How fast an Economy is expanding)

+Y% -annual percentage change of GDP PER CAPITA(The ability of the people to purchase goods and

services)

Economic Growth

Formula in computing the Gross Domestic Product:

GDP = C + G + I + NXWhere,• C = all private consumption, or consumer spending, in a

nation's economy• G = all government spending• I = all the country's investment• NX = nation's total net exports

total exports minus total imports or NX = Exports - Imports

Economic Growth

History of GDP GDP first came into use in 1937 in a report to the US Congress in response

to the Great Depression after Russian economist Simon Kuznets conceived the system of measurement. At the time, the preeminent system of measurement was the Gross National Product (GNP). After the Bretton Woods conference in 1944, GDP was widely adopted as the standard means for measuring national economies.Beginning in the 1950s, however, some began to question the faith of economists and policy makers in GDP internationally as a gauge of progress. Some observed, for example, a tendency to accept GDP as an absolute indicator of a nation’s failure or success, despite GDP’s failure to account for health, happiness, and other constituent factors of general welfare. In recent decades, governments have created various nuanced modifications in attempts to increase GDP accuracy and specificity.

Economic Growth

Economic Growth

Gross National Product - GNP

- an economic statistic that includes GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents.

- a measure of a country's economic performance, or what its citizens produced (i.e. goods and services) and whether they produced these items within its borders.

- measure the welfare of a country.

Economic Growth

- not a perfect measure of social welfare and even has its limitation in measuring economic output

- the recovery efforts for disasters add to GNP, yet the welfare of the nation does not improve because of the tragedy

- places no value on leisure time

Economic Growth

Formula in computing the Gross National Product:

GNP = C + G + I + NX +NFPWhere,• C = actual consumption spending of the household sector• G = Goods and services • I = Investment spending • NX = net exports • NFP = net factor payments

Economic Growth

Economic Growth

Gross Domestic Products (GDP) and Gross National Products (GNP)

are both

Economic indicators.- piece of economic data, usually of macroeconomic scale, that is

used by investors to interpret current or future investment possibilities and judge the overall health of an economy.

Economic Growth

CAUSES OF GROWTH IN ECONOMY

Economic Growth

1. by factors on the supply part of the economy2. vast rise in aggregate demand 3. The amount of resources available 4. Their productivity

Economic Growth

BENEFITS OF ECONOMICGROWTH

Economic Growth

1. Open markets - internal and external competition in markets for goods and services

2. Promotion of free-thinking capital market providing a flow of liquidity to finance investment

3. Protection of private property rights 4. Scale of government spending - possible crowding out of the private

sector if government spending is too

5. Efficiency of the tax and benefit system - may create disincentives which constrains the active labor supply

6. Macro-economic stability and credibility of macro economic policy

Economic Growth

Philippine Economic Update as of January 2015

• Economic growth slowed down to 5.3 percent in the third quarter of 2014

• Government consumption contracted by 2.6 percent while infrastructure spending fell by 6.2 percent

• more than a million jobs were created in October 2014• Lower government spending, investment delays and

slowdown, and weaker exports are likely to limit economic growth to 6 percent in 2014 and 6.5 percent in 2015

Economic Growth

• Eradicating poverty• Higher investments• Tax policy reform• Reforms to strengthen tax administration and improve the

transparency and accountability of government are essential to make it a success

• Higher investments in infrastructure, health, and education

ECONOMIC DEVELOPMENT

- branch of economics that focuses on improving the economies of developing countries.

- considers how to promote economic growth in such countries by improving factors like health, education, working conditions, domestic and international policies and market conditions

- examines both macroeconomic and microeconomic factors relating to the structure of a developing economy and how that economy can create effective domestic and international growth

ECONOMIC DEVELOPMENT

- sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area.

- selective attack on worst form of poverty- Implies the process of higher level of productivity in all sectors

of economy- Process of stepping up the rate of capital formation that is

needed for rapid economic development.

Economic Growth

History of the Economic Development of the Philippines• 1575. Spain takes control of non-Islamic areas and monopolizes trade.• 1898. Spain sells the Philippines to the United States for $20 million

after a mock battle in Manila Bay.• 1900. The United States establishes a commonwealth government and

enacts a law that will grant the Philippines independence by 1944.• 1942. Japanese forces conquer Manila as U.S. troops on the Bataan

peninsula surrender to Gen. Yamashita.• 1945. Japanese occupation ends. The Philippines joins the United

Nations as a charter member.• 1946. The Philippines gains independence from the United States on July 4,

becoming an independent republic with Manuel Roxas as president.

Economic Growth

History of the Economic Development of the Philippines• 1950S. The Communist Hukbalahap Movement collapses. The country rebuilds

itself and earns the distinction of becoming the second most prosperous nation in Asia, next to Japan.

• 1967. The Philippines joins the Association of Southeast Asian Nations (ASEAN).• 1972. President Marcos declares martial law in the guise of controlling a

Communist rebellion. He orders the arrest of all opposition leaders, suspends the constitution, and dissolves the National Assembly. A new constitution is approved in a national referendum that proposes a return to a parliamentary form of government. President Marcos serves as president while Cesar Virata serves as prime minister. Muslim insurgency in the South intensifies.

• 1990s. The Philippine economy registers positive growth. International agencies express optimism about the country's development and dubs the country as one of Asia's "tiger cub" economies.

ECONOMIC DEVELOPMENT

TWO FACTORS OF ECONOMIC

DEVELOPMENT

ECONOMIC DEVELOPMENT

1. EconomicTraditional Approach-defines development

strictly in Economic TermsGrowing Economy Approach-defines

development in Material Welfare, Eradication of Mass poverty; human beings are at the center of Economic Development

ECONOMIC DEVELOPMENT

2. Non- Economic - are the elements which have no direct effect upon the economy of the country

ReligionEthnicitySocial ActivityPolitical Elements

ECONOMIC DEVELOPMENT

Underdevelopment• Takes place when resources

are not used to their full socio-economic potential

• Unutilized and underutilized manpower

• Unexploited natural resources

Economic Development• High Tendency of growth

rate• Development of economic

wealth of countries or regions for the well-being of their inhabitants

Traditional/Conventional statistics/indicators to measure progress of the Philippine society

1. The Philippine System of National Accounts (PSNA)

2. Statistical Indicators on Philippine Development (StatDev)

3. Philippine Millennium Development Goals (MDGs)

ECONOMIC GROWTH AND

ECONOMIC DEVELOPMENT

IN COMPARISON

Differences:Economic Growth• It is a narrow concept• Increase in the national income is

a sufficient indicator• It is applicable to developed

countries• It is an automatic process• It is a process that occurs in

dynamic economy• Comes with in a particular time

period• Quantitative Changes are

expected

Economic Development• It is a broad concept• Increase in real national income• Applicable to developing

countries• Result of purposeful and planned

efforts• Occurs in statistic economies due

to structural and technological changes in the economy

• Continuous process that applies in the long run period

• Qualitative changes are expected