By: Fej Billones
Grace Salas
Bianca Reyes
Economic Principles
I.
GDP
II. GNP
I.
II.
III.
IV.
V.
VI.
Problem Statement
Relative Importance of the Problem in
Various Developing Countries
Case Discussion/Recommendation
Goals and Objectives
References
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.
1. 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 approach

sums 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)

Nominal GDP: GDP at
current prices

Real 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
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 drugs
Environmental cost

Environment 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.
57% -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:
Electronics 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
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.
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.
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.
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.
Philippines is ranked # 29 in the world in
2014
Philippines is ranked # 29 in the world in
2014
Philippines is ranked # 25 in
the world in 2014
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)
The Expenditure Approach
The Income Approach
GDP = C + I + G + (EX - IM)
GDP = National Income
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
Where in National Income includes:
Compensation of Employees
Proprietor’s income
Rental Income
Corporate Profits
Net Interest
Indirect taxes subsidies
Net business Transfer
Surplus/Income of gov’t enterprises
GNP = GDP + Net factor income from abroad
GNP is being reported by: Philippine National Statistical
Coordination Board.
Is the GNP being used
now accurate?
Current Formula:
GNP = GDP + net factor
income from
the rest of the
world
The current GNP
computation may not be
measuring the real
economic value of a
country.
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
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
Military Expenditure
Increasing military expenditure
(monetary transactions) add to the
GNP however its not productive to the
economy
Why is it a problem: GNP is overstated
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
Environmental Considerations
The operations by private
industries/factories add up to the
GNP of the country. However,
the negative impact on the
environment is not accounted
for.
Why is it a problem: GNP is
overstated
1.
What do you think should be taken off national accounts to arrive at a real
measure of progress?
2.
Role of Women:
Female Population in PH
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
Public Sector and Private Sector
Military 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
Exploitation of irreplaceable resources
Environmental 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.
E.q. (for identified health prob)
Total Production
xx
Expenses on impact of the
production
xx
Net of production
xx
E.q.
Mineral Reserves
Depletion
Net Reserve
xx
(xx)
xx _
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.
# 3. Physical Quality of Index
Includes 3 indicators
- Life expectancy
- Infant mortality rate
- Literacy 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.
PQLI - Philippines is ranked # 59 in the world in 2014
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Country
Switzerland
United States
Germany
Sweden
Finland
Denmark
Canada
Australia
United Arab
Emirates
Austria
New Zealand
Japan
Norway
Netherlands
United Kingdom
Estonia
Ireland
Kuwait
Saudi Arabia
France
Belgium
Slovenia
Portugal
Puerto Rico
Spain
Czech Republic
Lithuania
South Korea
Taiwan
South Africa
Quality of Life Index
206.23
195.55
192.69
180.92
178.88
178.55
178.29
175.98
173.27
171.82
168.56
168.47
168.41
160.98
150.97
145.4
142.35
141.37
139.88
136.31
134.71
125.56
124.71
123.64
123.64
122.99
121.91
117.9
114.06
111.61
Rank
31
32
33
34
35
36
37
38
39
40
41
42
43
Quality of Life Index
108.74
108.7
95.19
91.94
91.16
90.61
89.05
87.99
83.47
83.18
81.12
78.01
77.48
45
46
47
48
49
50
51
52
53
54
55
56
57
58
Country
Slovakia
Croatia
Poland
Uruguay
Israel
Italy
Malaysia
Singapore
Mexico
Hungary
Argentina
India
Greece
Bosnia And
Herzegovina
Belarus
Hong Kong
Chile
Serbia
Turkey
Romania
Bulgaria
Thailand
Ecuador
Kazakhstan
Jordan
Brazil
Colombia
China
59
Philippines
28.09
60
Pakistan
22.32
44
74.6
74.43
73.24
69.32
69.31
67.82
63.27
62.6
56.64
42.25
40.64
39.54
38.76
36.53
30.3
# 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 Welfare
MEW = Value of GDP + Value of Leisure Time + Value
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
-
of
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

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
Source: BIS Sharpnel, Datamonitor,Euromonitor
2027
IV. Relative importance of the problem in various developing countries
Global Perspective
Emerging 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.
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
The 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





http://knoema.com/nwnfkne/world-gdp-ranking-2014-data-and-charts
http://www.economicsconcepts.com/physical_quantity_of_life_index.htm
http://www.preservearticles.com/201107119036/brief-notes-on-physical-quality-of-life-indexpqli.html
http://www.numbeo.com/quality-of-life/rankings.jsp
http://www.economicsonline.co.uk/Global_economics/Measure_of_economic_welfare_MEW.ht
ml
National 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_m
easure_of_growth_.html#sthash.NbHxKhm6.dpuf
http://www.project-syndicate.org/commentary/poor-countries-need-more-accurategdp-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