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
forinflation.
For comparing one country's economic growth to
another, GDP orGNPper 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

- themonetary valueof 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 andexportsminusimportsthat occur
within a defined territory.
- usually calculated on an annual basis, it can be calculated on
aquarterlybasis as well
- measurement of a nations 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 + NX
Where,
C = all private consumption,
spending, in a nation's economy
G = all government spending
I = all the country's investment
NX = nation's total net exports

or

consumer

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 theGreat Depressionafter Russian economist Simon
Kuznetsconceived the system of measurement . At the time, the
preeminent
system
of
measurement
was
the
Gross National Product (GNP) . After theBretton Woodsconference
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
nations failure or success, despite GDPs 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 sp
ecificity
.

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 +NFP
Where,
C = actual consumption
household sector
G = Goods and services
I = Investment spending
NX = net exports
NFP = net factor payments

spending

of

the

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
economy
2. vast rise in aggregate demand
3. The amount of resources available
4. Their productivity

Economic Growth

BENEFITS OF
ECONOMIC
GROWTH

Economic Growth
1.
2.
3.
4.

Open markets - internal and external competition in

markets for goods and services
Promotion of free-thinking capital market providing a flow of
liquidity to finance investment
Protection of private property rights
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 ofeconomicsthat focuses on improving
theeconomiesof developing countries.
- considers how to promoteeconomic growthin 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. Economic
Traditional Approach-defines
development
strictly in
Economic Terms
Growing 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
Religion
Ethnicity
Social Activity
Political Elements

ECONOMIC DEVELOPMENT
Underdevelopment
Takes place when
resources are not used
to their full socioeconomic 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

Economic Development

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

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