economics term paper

Running Head: ECONOMIC PERFORMANCE OF THE PHILIPPINES1

ECONOMIC PERFORMANCE OF THE PHILIPPINES 11

Economic Performance of the Philippines:Five Years after the Great Economic RecessionJuan Gabriel LopezDe La Salle University - Dasmarias

The Problem and Its BackgroundIntroductionFive years have passed since the so-called Great Economic Recession has started and escalated to a certain level that the crisis spread from the United States to the European countries until it reached the ASEAN countries. The recession eventually crippled the economy of the countries which are vulnerable to this kind of crisis. The Philippines, which was still under Arroyos administration, was weather heavily by the recession that it heavily contributed to the averaged 4.5% economic growth, as stated in CIA World Factbook (as cited in Index Mundi, 2013), of the Philippines during January 2001 January 2010. Even after the Great Economic Recession, some nations are still experiencing the aftermath of the crisis thus some countries werent able to recover their damages incurred during the brief recession. The Philippines, however, responded quickly to the aftermath and eventually were able to gradually progress economically up until to this current year. Statement of the ProblemThe Great Economic Recession of 2008The Great Economic Recession also referred to as the Lesser Depression, the Long Recession, or the global recession of 2009 was a global economic decline in the late 2000s. It is a worldwide recession that began in 2008 and ended in 2009. The Great Economic Recession began as a national recession in United States in December 2007 but eventually the said recession affected the entire world economy, with greater detriment to some countries than others. It was a major global economic recession characterised by various systemic imbalances, and was sparked by the outbreak of the U.S. subprime mortgage crisis and financial crisis of 200708. The economic side effects of the European sovereign debt crisis, austerity, high levels of household debt, trade imbalances, high unemployment, and limited prospects for global growth in 2014 (Lee, 2012), continue to provide obstacles for many countries to achieve a full recovery from the recession. According to the U.S. National Bureau of Economic Research (2008), the US recession began in December 2007 and ended in June 2009, and thus spanned over 18 months. US mortgage-backed securities, which had risks that were hard to assess, were marketed around the world. The bad financial situation was made more difficult by a sharp increase in oil and food prices. The emergence of sub-prime loan losses in 2007 began the crisis and exposed other risky loans and over-inflated asset prices. With loan losses mounting and the fall of Lehman Brothers on 15 September 2008, a major panic broke out on the inter-bank loan market. As share and housing prices declined, many large and well established investment and commercial banks in the United States and Europe suffered huge losses and even faced bankruptcy, resulting in massive public financial assistance.The global recession resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices (Isidore, 2008). Several economists predicted that recovery might not appear until 2011 and that the recession would be the worst since the Great Depression of the 1930s (Lightman, 2009). The conditions leading up to the crisis, characterised by an exorbitant rise in asset prices and associated boom in economic demand, are considered a result of the extended period of easily available credit (Wearden, 2008) and inadequate regulation and oversight (Andrews, 2008).The Measurement of Economic PerformanceA countrys economic performance can be measured through many different ways with different approaches. The most common indicator of a certain countrys economic performance is through its measurement of the said countrys Gross National Product (GNP) or also known as Gross National Income (GNI). The researcher focused on the aforesaid economic performance indicator in order to concentrate the scope of the research to the different approaches that are derived from the said indicator. The said approaches are also straightforward in terms of computing for the Gross National Income thus making it less complex to understand for people who are not economically aware. In order to understand these approaches, it is practicable to first discuss what is Gross National Income and how does it measures the economic performance of a country.Gross National Income (GNI) is the total income earned by a nations permanent residents which are also called nationals. It differs from GDP by including income that citizens from that nation earn abroad and excluding income that foreigners earn in that said nation (Mankiw, 2009, p.529). GNI involves income earned that are involved in economic activities and irrespectively whether the said economic activities are carried out within the economic territory of the said nation or outside, in a specified period. In other words, GNI or GNP is one measure of the economic condition or performance of a certain country and under the assumption that a higher GNI leads to a higher quality of living with all other things being equal. Contrasted with GDP, GNI measures the output generated by a certain countrys economic enterprises whether physically located domestically or located abroad (Leipert, 1987, p.373) while the former measures only the total market value of all final goods and services produced within a country in a given period of time (Mankiw, 2009, p.528). Therefore, Gross National Income is the basic concept of national income accounting. Gross National Income that is measured at current market prices is called Nominal GNI. This method of estimating the GNI involves measuring the GNI at the prices of goods and services being measured at the prices existing in the market in current year whereas Gross National Income that is estimated at a fixed price or constant price of a specific base year is called Real GNI (Gross National, n.d.). There are three different approaches but only two of the said approaches will be considered for this research as they are readily available and most commonly used. The first approach would be the Expenditure Approach and the other one would be the Industrial Origin Approach. The former includes a number of variables or components for the GNI to be calculated while the latter is only focused to three main components. The Expenditure Approach is the most popular national output accounting method. It focuses on finding the total output of a nation by finding the total amount of money spent. In this approach, the total value of all goods is equal to the total amount of money spent on goods. The basic formula for domestic output combines all the different areas in which money is spent within the region and then combining them to find the total output (Student#1, 2009).The formula for the Expenditure Approach would be:C + I + G+ (X-M) SD = GNI or GNPThe components are the following: Consumption Expenditure (C) includes expenditure by household durable goods such as automobile, refrigerators, etc., non-durable goods such as food, clothing, etc. and services such as doctors, education, etc. Gross Investment (I) includes all final purchase of machinery, equipment, and tools by business enterprise in given time period-change in capital stock all current construction changes in inventories, changes in stocks of finished goods and goods in process as well as changes in the raw material that businesses keep on hand. Inventories can be negative, positive or zero.Government Expenditure (G) includes all governmental spending on the finished product of business and all direct purchases of resources such as labour. It excludes all government transfer payments because it doesn't reflect any current production.Expenditures on goods and services exported (X) and imported (M) and Net Exports (X-M) include the difference between the imports and exports. It is the component of the total demand for our goods and it can be negative, positive or zero.Statistical discrepancy (SD) is the official adjustment factor in the national income and product accounts. It is used to ensure equality between the income and expenditures approaches to measuring gross national income (Cloutier, 2009).Another approach would be the Industrial Origin Approach. As explained in an online lecture by Momponbanua (2013), it measures the GNI by adding the total gross value added of the three sectors of the economyagriculture, industry or manufacturing, and services. The aforementioned approach also entails the consolidation of the production of each industry less intermediate purchases from all other industries. This method of measurement shows the unduplicated contribution by each industry to the total output. The total market or gross value consists of the value added of the sector, the indirect taxes net of subsidies, and the capital consumption allowance for each sector.Computation using the Industrial Origin Approach would be done using the formula:A + I + S = GNI or GNPWherein the components are the following The Agricultural sector (A) that also covers the fisheries and forestry.The Industrial sector (I) which includes mining and quarrying, manufacturing, construction, and electricity, gas and water.Lastly would be the Service sector (S) where it compromises transportation, trade, finance and housing, private services, and government services.Measuring the GNI of a certain country using this approach has certain flaws. These flaws limited the calculation of the gross national income in several ways. The said approach does not measure production but it measures sales. It omits all the money spent in the underground economy and it doesnt distinguish between qualities of the products. So in actuality, GNP measures the amount of money transferred from consumers to politically connected vendors. GNP merely measures the income of the politically sanctioned commercial class. When GNP goes up, the commercial class gets richer; when it goes down, that class gets poorer (Kozy, 2013).The Economic Performances of the Philippines in 2009, 2010, 2011, 2012 and 2013, five years after the Great Economic Recession.Discussing the Economic Performances of the Philippines in 2009, 2010, 2011, 2012 and 2013, five years after the Great Economic Recession would be strictly limited to the GDP and GNI of the Philippines during the said years. Each year would be divided into four quarters thus a quarterly economic performance reports scope would be up to three months. As discoursed earlier, measuring economic performance of a certain country can be done by computing the Gross National Income (GNI). The calculation of the GNI of the Philippines is complex because of the fact that there are a lot of variables that are needed to be considered for an accurate and precise computation of the Gross National Income of the said country. Also stated earlier, generally, there are three ways of computing the GNI of a country but for the sake of focusing on the macroeconomic level of nature of this paper, the researcher only gathered data that are computed using the Expenditure Shares Approach and the Industrial Origin Approach. The two aforesaid approaches in computing the Gross Domestic Product (GDP) and the Gross Domestic Income (GNI) are considered precise and accurate ways of determining the economic performance of the Philippines and the data involved in the computation using the said approaches are readily available through the Philippine Statistical Authority National Statistical Coordination Board (NSCB) and already broken down to different components for further analysis of the GNI and as well as the GDP of the country.The Philippines quarterly and annual economic performance reports that can be found on the website of the Philippine Statistical Authority National Statistical Coordination Board (NSCB) are also composed of the two aforementioned approachesExpenditure Shares and Industrial Origin Approach. Both data of the said approaches are broken down into four quarters of a year and then compared to another set of four quarters of another year preferably a year later or earlier. For instance, the first, second, third and four quarter of the year 2008 are respectively compared to the first, second, third and four quarter of the year 2007 and/or 2009. Assessment of the data can also be done annually where the annual growth per year is compared to the previous year or the year after. Considering the introduction of the quarterly and annual economic performance report comparisons, data gathered are also assessed by either a fixed base value of prices or to the current price of the current year. The fixed base value of prices can be called Constant Prices wherein it was defined earlier in this paper and the current price of that certain year pertains to Current Prices. These said prices can be in Philippine currency and are commonly in millions in terms of denomination. Lastly would be the growth rate of either the quarterly or annual economic performance reports which are commonly in percentage form. Presentation, Interpretation and Analysis of DataPresentation of DataWhat are the Economic Performances of the Philippines in 2009, 2010, 2011, 2012 and 2013, five years after the Great Economic Recession?Data collected from years 2009 up to 2013 are all gathered from the Philippine Statistical Authority National Statistical Coordination Board. The NSCB provided the necessary information about the economic performances of the Philippines five years after the Great Economic Recession. Data sets with the application of the Expenditure Approach and the Industrial Origin Approach reflected the Gross National Income of the Philippines which are reported quarterly and also annually. For the purpose of precision and deterrence of information overload, only annual reports or statistics of the economic performance are collected and assessed in this paper.GNP and GDP by Expenditure ApproachAnnual 2008 and 2009 at Current and Constant 1985 Prices, in Million PesosTYPE OF EXPENDITUREAT CURRENT PRICESAT CONSTANT PRICES

20082009Growth Rate(%)20082009Growth Rate(%)

Personal Consumption Expenditure5,281,0725,675,0667.51,107,5691,149,8283.8

Government Consumption716,544813,82413.693,746101,7538.5

Capital Formation1,131,4901,070,787-5.4256,244230,906-9.9

Exports2,736,3102,401,580-12.2663,324569,294-14.2

Less : Imports2,872,5722,341,600-18.5643,572606,283-5.8

Statistical discrepancy430,37049,487-58,360-13,519

GROSS DOMESTIC PRODUCT7,423,2137,669,1443.31,418,9521,431,9780.9

Net factor income from the rest of the world827,0361,031,679168,845202,704

GROSS NATIONAL PRODUCT8,250,2498,700,8225.51,587,7971,634,6823.0

MEMORANDUM ITEMS: Trading gain (loss) from changes in the terms of trade-51,28251,118

Gross National Income1,536,5151,685,800

Annual 2009 and 2010 at Current and Constant 1985 Prices, in Million PesosTYPE OF EXPENDITUREAT CURRENT PRICESAT CONSTANT PRICES


Personal Consumption Expenditure5,674,9666,192,8629.11,152,6581,214,0055.3

Government Consumption809,688884,2769.2101,163103,8862.7

Capital Formation1,124,6441,329,73718.2243,052284,28017.0

Exports2,431,3733,098,14927.4574,284721,53325.6

Less : Imports2,364,7612,881,29521.8621,543750,20120.7

Statistical discrepancy3,007-110,692-17,499-36,351


Net factor income from the rest of the world1,131,0671,237,157222,821236,198


MEMORANDUM ITEMS: Trading gain (loss) from changes in the terms of trade63,86883,904

Gross National Income1,718,8041,857,254

Annual 2010 and 2011 at Current and Constant 2000 Prices, in Million PesosTYPE OF EXPENDITUREAt Current PricesAt Constant Prices


1. Household Final Consumption Expenditure6,442,0337,142,60610.93,945,8274,186,1966.1

2. Government Final Consumption Expenditure875,291916,1734.7570,208566,302-0.7

3. Capital Formation1,849,3802,123,32114.81,183,6501,315,00311.1

A. Fixed Capital1,847,7481,881,0651.81,182,2061,213,7992.7

1. Construction949,406948,9520.0490,659470,303-4.1

2. Durable Equipment692,519719,1493.8567,833617,4168.7

3. Breeding Stock & Orchard Dev't173,494178,5922.998,92898,592-0.3

4. Intellectual Property Products32,32834,3736.324,78527,48910.9

B. Changes in Inventories1,632242,2561,444101,204

4. Exports3,133,5073,036,691-3.12,886,1332,777,837-3.8

A. Exports of Goods2,259,8762,092,801-7.42,367,5202,241,845-5.3

B. Exports of Services873,632943,8908.0518,613535,9923.4

5. Less: Imports3,296,7323,524,7996.92,884,2802,940,3581.9

A. Imports of Goods2,635,7522,842,3987.82,330,1152,363,1901.4

B. Imports of Services660,980682,4013.2554,165577,1684.2

6. Statistical Discrepancy040,79308,568

GROSS DOMESTIC PRODUCT9,003,4809,734,7835,701,5395,913,549 3.7

Net Primary Income2,992,5973,069,1298.11,859,8471,843,117

GROSS NATIONAL INCOME11,996,07712,803,9126.77,561,3867,756,6662.6




2. Government Final Consumption Expenditure931,6821,096,83117.7575,824643,82011.8

3. Capital Formation2,113,9952,053,161-2.91,279,6821,222,824-4.4

A. Fixed Capital1,857,2972,076,69511.81,184,0181,286,7838.7

1. Construction928,3131,091,04217.5460,387523,36313.7


3. Breeding Stock & Orchard Dev't178,640181,0131.398,678100,0431.4


B. Changes in Inventories256,698-23,53495,664-63,960

4. Exports3,019,7433,196,2325.82,764,8773,005,4758.7

A. Exports of Goods2,069,2592,125,8272.72,225,5582,413,3128.4

B. Exports of Services950,4841,070,40512.6539,319592,1639.8

5. Less: Imports3,506,9463,587,3462.32,890,4863,011,7584.2



6. Statistical Discrepancy0-26,70003,793


Net Primary Income3,142,6063,346,7121,878,6071,940,391





2. Government Final Consumption Expenditure1,112,5861,243,11311.7653,067709,1098.6

3. Capital Formation1,950,5242,243,71415.01,168,3861,381,25618.2

A. Fixed Capital2,047,9572,332,66313.91,280,0421,430,34811.7

1. Construction1,074,1691,236,43615.1517,184573,47510.9


3. Breeding Stock &Orchard Dev't181,123178,032-1.7100,06998,536-1.5


B. Changes in Inventories-97,433-88,949-111,656-49,092

4. Exports3,254,4603,332,1962.43,054,0713,077,9840.8

A. Exports of Goods2,120,1802,124,2790.22,426,4932,428,4740.1

B. Exports of Services1,134,2791,207,9176.5627,578649,5103.5

5. Less: Imports3,590,5633,631,2071.13,006,3763,136,3244.3



6. Statistical Discrepancy0-97,495040,682




GNP and GDP by Industrial Origin ApproachAnnual 2008 and 2009 at Current and Constant 1985 Prices, in Million PesosINDUSTRY/INDUSTRY GROUPAt Current PricesAt Constant Prices


Agri. Fishery, Forestry1,102,7561,144,6153.8259,406259,5730.1

Industry Sector2,349,4262,295,126-2.3465,017455,784-2.0

Service Sector3,971,0314,229,4026.5694,529716,6213.2


Net factor incomefrom the rest of the world827,0361,031,679168,845202,704


Annual 2009 and 2010 at Current and Constant 1985 Prices, in Million PesosINDUSTRY/INDUSTRY GROUPAt Current PricesAt Constant Prices


Agri. Fishery, Forestry1,138,3341,182,3743.9259,424258,081-0.5

Industry Sector2,318,8822,663,49714.9460,205515,75112.1

Service Sector4,221,7024,667,16610.6712,486763,3207.1


Net factor incomefrom the rest of the world1,131,0671,237,157222,821236,198




Agriculture, Hunting, Forestryand Fishing1,108,7181,244,57512.3662,665679,9992.6

Industry Sector2,932,2793,070,7204.71,859,5151,894,7651.9

Service Sector4,962,4835,419,4887.43,179,3593,338,7862.6






Agriculture, Hunting, Forestry and Fishing1,245,1961,256,7300.9680,445698,7362.7

Industry Sector3,056,4683,281,7807.41,901,4012,024,5806.5

Service Sector5,433,8576,029,89511.03,342,5643,591,5497.4






Agriculture, Hunting, Forestry and Fishing1,250,6161,297,9033.8698,937706,6471.1

Industry Sector3,284,5083,582,7879.12,022,6232,213,8929.5

Service Sector6,029,7626,665,41410.53,590,1113,843,2297.1




Interpretation and Analysis of DataWhat are the Economic Performances of the Philippines in 2009, 2010, 2011, 2012 and 2013, five years after the Great Economic Recession?The Expenditure and the Industrial Origin Approach which were applied in calculating the GDP and GNI or GNP of the Philippines in order to assess its economic performances during the years 2009, 2010, 2011, 2012, and 2013, five years after the Great Economic Recession revealed different results. Table 1 shows the growth rates of the GNI that is calculated using the Expenditure Approach and the Industrial Origin for the years 2009, 2010, 2011, 2012, and 2013 at current prices. Annual reportGNI Growth rate

2008 - 20095.5%

2009 - 201010.7%

2010 - 20116.7%

2011 - 20128.1%

2012 - 20139.7%

Table 1. GNI growth rates for years 2008 to 2013In addition to the simplified GNI growth rates for the years 2008 to 2013, GNI also varies when compared to current prices and constant prices. The Philippines Gross National Income growth rate during the years 2008 - 2009 amounted to only 5.5% then almost doubled when the years 2009 -2010 came. The said rate again dipped to 6.7% for years 2010 2011 but gradually rose to 8.1% and 9.7% over the years 2011 2012 and 2012 2013 respectively.

Findings, Conclusion and RecommendationFindingsThe researcher, while conducting the study of the economic performances of the Philippines during the years 2009, 2010, 2011, 2012, and 2013, five years after the Great Economic Recession, found out that the said countrys approaches on calculating the Gross National Income were more inclined to the Expenditure Approach and the Industrial Origin Approach. The researcher learned that even if the calculation of the Gross National Income was done using either aforementioned approaches, the result will still be the same. The study also imparted that the measurement of economic performance of a certain country doesnt include those of the illegal trade and also it doesnt considers the quality of the product or the service being produced by the country. Thus, a higher Gross National Income doesnt necessarily equate to a higher quality of life.Conclusion and RecommendationsConsidering all of the data and facts that were acquired for this study, the researcher would conclude that the Philippines, despite being weathered by Great Economic Recession of 2008, was able to progress and still prosper. This conclusion was based on the fact that the growth rate of the Philippines was able to increase five years after it has been affected by the recession and also considering the fact that the Gross National Income of the country has been steadily increasing for the past two years. However, since the calculation of the GNI using the Expenditure and Industrial Origin Approaches are on the macroscopic level of assessing the economic performance of the Philippines five years after the Great Economic Recession, it doesnt reflect the individual or the citizens personal experiences after the said recession. Consequently, the researcher would also conclude that regardless of having a positive Gross National Income growth rate over the five years, the study wasnt able to verify if the individuals quality of life during those said years. It just measures how the economy is doing as individuals go on with their lives and not how an individual is doing in the present economy.Overall, the data acquired proved to be significant and contributed to the success of the dissertation about the economic performance of the Philippines after being weathered by the Great Economic Recession of 2008. out the s doing as individuals go on with their lives and not how is an individual is doing in the p

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