Gross Domestic Product/Gross

National Product
Module 4
 GDP of the Philippines
• Real GDP (purchasing power parity)
• $871.56 billion (2020 est.)

$963.83 billion (2019 est.)

$908.26 billion (2018 est.)

note: data are in 2017 dollars

GDP - composition, by sector of origin
• agriculture: 9.6% (2017 est.)

industry: 30.6% (2017 est.)

services: 59.8% (2017 est.)

 GDP - composition, by end use
• household consumption: 73.5% (2017 est.)

government consumption: 11.3% (2017 est.)

investment in fixed capital: 25.1% (2017 est.)

investment in inventories: 0.1% (2017 est.)

exports of goods and services: 31% (2017 est.)

imports of goods and services: -40.9% (2017 est.)

 Agricultural products
• sugar cane, rice, coconuts, maize, bananas,
vegetables, tropical fruit, plantains, pineapples,
cassava
 Industries

• semiconductors and electronics assembly,

business process outsourcing, food and
beverage manufacturing, construction,
electric/gas/water supply, chemical products,
radio/television/communications equipment
and apparatus, petroleum and fuel, textile and
garments, non-metallic minerals, basic metal
industries, transport equipment
 Labor force
• 41.533 million (2020 est.)
• country comparison to the world: 15
• Labor force - by occupation
• agriculture: 25.4%

industry: 18.3%

services: 56.3% (2017 est.)

 Unemployment
• Unemployment rate
• 5.11% (2019 est.)

5.29% (2018 est.)

• country comparison to the world: 82
• Population below poverty line
• 16.7% (2018 est.)
Stock and Flows
Stock and Flows
Injections & Withdrawals
Gross Domestic Product (GDP)
 Gross Domestic Products
(GDP)
• Gross domestic product (GDP) is the
market value of all final goods and
services produced within an economy in a
given period of time.
 Intermediate Goods and Value Added

• Many goods are produced in

stages: raw materials are processed into
intermediate goods by one firm and then
sold to another firm for final processing.
• The answer is that GDP includes only the
value of final goods.
Final Goods
Final Goods
Final Goods
 The Value Added
• The value added of a firm equals the value of the firm’s output
less the value of the intermediate goods that the firm
purchases.
• In the case of the hamburger, the value added of the rancher is
$0.50 (assuming that the rancher bought no intermediate
goods), and the value added of McDonald’s is $1.50 – $0.50, or
$1.00. Total value added is $0.50 + $1.00, which equals $1.50.
For the economy as a whole, the sum of all value added must
equal the value of all final goods and services.
• Hence, GDP is also the total value added of all firms in the
economy.
GDP vs. GNP
 Net Factor Income Abroad
• NFIA is the difference between the factor
income receive from the rest of the world
and the payments to factors of production
abroad for their investments in the
Philippines.
– For example, overseas remittance of Filipinos
working abroad, interest and dividends received
by Filipino nationals in their investments abroad
constitute positive factor income from abroad.
GNP Formula
 Real GDP Versus Nominal GDP
• Economists call the value of goods and
services measured at current prices nominal
GDP.
Real GDP Versus Nominal GDP
 Real GDP
• Real GDP: the quantity of final goods and services produced by
the economy in a
specified time period.
• Economic growth: an increase in real GDP.
• Rate of economic growth: the annual percentage change in real GDP
• A better measure of economic well-being would tally the economy’s
output of goods and services without being influenced by changes in
prices.
Real GDP
Real GDP
 Real GDP (purchasing power parity)
• $871.56 billion (2020 est.)

$963.83 billion (2019 est.)

$908.26 billion (2018 est.)

note: data are in 2017 dollars

• country comparison to the world: 28
 Real GDP
• $963.83 billion (2019 est.) - $908.26 billion
(2018 est.)
_________________________________ X 100
$908.26 billion (2018 est.)
= 6.1%
 Real GDP growth rate
• 6.04% (2019 est.)

6.34% (2018 est.)

6.94% (2017 est.)

• country comparison to the world: 29
 Real GDP per capita
• $8,000 (2020 est.)

$8,900 (2019 est.)

$8,500 (2018 est.)

note: data are in 2017 dollars

• country comparison to the world: 151
 GDP (official exchange rate)

• $377.205 billion (2019 est.)

Philippines: Gross domestic product (GDP) in current prices
(Nominal) from 1986 to 2026
 The GDP Deflator

• $377.205 billion (2019 est.) / $963.83 billion

(2019 est.) = 0.3913
 The GDP Deflator
• If P is the price of bread and Q is the quantity sold, then
nominal GDP is the total number of dollars spent on bread
in that year, P Q. Real GDP is the number of loaves of
bread produced in that year times the price of bread in
some
base year, Pbase Q. The GDP deflator is the price of bread
in that year relative to the price of bread in the base year,
P/Pbase.
 The GDP Deflator

$377.205 billion (2019 est.) / 0.3913 =

$963.83 billion (2019 est.)
 Y = C + I + G + NX.
• The national income accounts divide GDP into
four broad categories of
spending:
■Consumption (C)
■Investment (I)
■Government purchases (G)
■Net exports (NX)
Y = C + I + G + NX.
Y = C + I + G + NX.
Y = C + I + G + NX.
Net Export (NX)
 Net Factor Income Abroad
• GNP = GDP Factor Payments from
Abroad Factor Payments to Abroad
• The number of Overseas Filipinos Workers (OFWs) in 2020 was
estimated at 1.77 million, which was lower than the 2.18 million
reported in 2019. The number of Overseas Contract Workers
(OCWs) decreased to 1.71 million in 2020 from 2.11 million in 2019.

• $34.88 billion
Net Factor Income Abroad
Net Factor Income Abroad
Net Factor Income Abroad
Net national product (NNP)
The national income accounts divide national income into six
components
The national income accounts divide national income into six
components
The national income accounts divide national income into six
components
 Disposable Personal Income

• Disposable Personal Income

Personal Income Personal Tax
and Nontax Payments
Not included in GNP:
 Phil. Govt. Institutions
• The Philippine Statistics Authority provides Gross National Product in local
currency. Bangko Sentral ng Pilipinas average market exchange rate is used for
currency conversions. Gross National Product prior to Q1 2000 is based on old
classification of data.
 Inflation
• Inflation is the rate of increase in prices
over a given period of time.
• Inflation is typically a broad measure,
such as the overall increase in prices or
the increase in the cost of living in a
country.
 Deflation
• Deflation is a decrease in the general price
level of goods and services.
• Deflation occurs when the inflation rate falls
below 0%.
• Inflation reduces the value of currency over
time, but sudden deflation increases it.
Inflation
Inflation
 Inflation
• How to Calculate Percentage Decrease
1.Subtract starting value minus final value.
2.Divide that amount by the absolute value of
the starting value.
3.Multiply by 100 to get percent decrease.
4.If the percentage is negative, it means there
was an increase and not an decrease.
 Inflation rate (consumer prices)
• 2.4% (2019 est.)

5.2% (2018 est.)

2.8% (2017 est.)

Economies of Scale
Internal Economies of Scale - Bulk
Internal Economies of Scale - Bulk
Mass Marketing (Mass Consumption
vs. Niche Market (Glocalization)
Mass Marketing (Mass Consumption) vs. Niche
Market (Glocalization)
 External Economies of Scale
Build Build Build (BBB) Infrastructure
 External Economies of Scale
Build Build Build (BBB) Infrastructure
 Capital Flight
• Capital flight is a large-scale exodus of financial assets and
capital from a nation due to events such as political or
economic instability, currency devaluation or the imposition of
capital controls.
• It can refer to an exodus of capital either from one nation, from
an entire region or a group of countries with similar
fundamentals. It can be triggered by a country-specific event,
or by a macroeconomic development that causes a large-scale
shift in investor preferences.
Capital Flight
Inflation
Liquidity Trap
Injections & Leakages (Withdrawals)
 Keynesian Pump
• Pump priming is the action taken to stimulate an
economy, usually during a recessionary period, through
government spending and interest rate and tax
reductions.
• The phrase "deficit spending" often implies a
Keynesian approach to economic stimulus,
in which the government takes on debt
while using its spending power to create
demand and stimulate the economy.
 IMF Lending
• IMF loans are meant to help member
countries tackle balance of- payments
problems, stabilize their economies, and
restore sustainable economic growth.
• The IMF was originally created in 1945 as part of
the Bretton Woods agreement, which attempted
to encourage international financial cooperation
by introducing a system of convertible
currencies at fixed exchange rates.
FOREX (Foreign Exchange Market)
 Balance of Payments
• The balance of payments of a country is
the difference between all money flowing
into the country in a particular period of
time and the outflow of money to the rest
of the world.
 Balance of Payments
• A trade deficit occurs when the value of
a country's imports exceeds the value
of its exports—with imports and exports
referring both to physical goods and
services.
• In simple terms, a trade deficit means a
country is buying more foreign goods and
services than it is selling.
 Balance of Payments
• A trade surplus is an economic measure
of a positive balance of trade, where a
country's exports exceed its imports.

• Trade Balance = Total Value of Exports -

Total Value of Imports.
 Exports
• $78.82 billion (2020 est.) note: data are in current
year dollars

$94.74 billion (2019 est.) note: data are in current

year dollars

$90.37 billion (2018 est.) note: data are in current

year dollars
• country comparison to the world: 47
 Exports - partners
• China 16%, United States 15%, Japan 13%,
Hong Kong 12%, Singapore 7%, Germany 5%
(2019)
• Exports - commodities
• integrated circuits, office machinery/parts,
insulated wiring, semiconductors, transformers
(2019)
 Imports
• $97.58 billion (2020 est.) note: data are in current
year dollars

$131.01 billion (2019 est.) note: data are in current

year dollars

$129.74 billion (2018 est.) note: data are in current

year dollars
• country comparison to the world: 40
 Imports
• Imports - partners
• China 29%, Japan 8%, South Korea 7%, United
States 6%, Singapore 6%, Indonesia 6%, Thailand
5%, Taiwan 5% (2019)
• Imports - commodities
• integrated circuits, refined petroleum
 World Bank
• The World Bank is an international organization
dedicated to providing financing, advice, and
research to developing nations to aid their
economic advancement.
• The bank predominantly acts as an organization
that attempts to fight poverty by offering
developmental assistance to middle- and low-
income countries.
 World Bank
• The World Bank is an international
financial institution that provides loans and
grants to the governments of low- and
middle-income countries for the purpose of
pursuing capital projects.
Asian Development Bank
 Asian Development Bank
• The ADB-Japan Scholarship Program (ADB-JSP)
enrolls about 300 students annually in academic
institutions located in 10 countries within the Region.
• Upon completion of their study programs, scholars
are expected to contribute to the economic and social
development of their home countries.
• ADB’s total commitments from its loans, grants,
guarantees, equity investments, and technical assistance
amounted to $22.8 billion in 2021.
Asian Development Bank (ADB)
The Macroeconomic Cycle
 Unemployment rate
• 5.11% (2019 est.)

5.29% (2018 est.)

• country comparison to the world: 82
• Population below poverty line
– 16.7% (2018 est.)
 Public debt
• 39.9% of GDP (2017 est.)
• 39% of GDP (2016 est.)

• GDP (official exchange rate)

• $377.205 billion (2019 est.)
 Budget
• revenues: 49.07 billion (2017 est.)

expenditures: 56.02 billion (2017 est.)

• Budget surplus (+) or deficit (-)
• -2.2% (of GDP) (2017 est.)
• country comparison to the world: 109
Philippines Budget 2021
Philippines Budget Top Recipients
 Philippines Debt Service
• Debt service bill hits P1.2 trillion in 2021
• THE NATIONAL Government’s debt service bill
jumped by a fourth to P1.2 trillion in 2021 as
amortization payments climbed, data from the
Bureau of the Treasury (BTr) showed.
• The BTr said the government’s debt payments
rose by 25% from P962.5 billion the previous
year. Last year’s total was just under the
P1.28-trillion debt service budget for 2021.
 •Philippines Bank Lending Rate was
reported at 6.542 % pa in Dec 2019.
•This records a decrease from the
previous number of 6.767 % pa for Nov
2019.

What is the bank interest rate in Philippines 2020?

Interest rates go down in Philippines
Date Key rates
04/17/2020 2.75%
03/19/2020 3.25%
02/07/2020 3.75%
09/27/2019 4.00%
Money Supply
Money Supply: Home Loans & Business
Loans
Money Supply
Financial System
What are the Limitations of Using GDP?
 What are the Limitations of Using GDP?
• Environmental Abuses
– Often, producers can increase their output by polluting or
damaging the environment. In developed countries, production
is better regulated, and companies that violate environmental
laws can face severe fines and penalties.

– However, many developing economies rely on high output to

support the growth of their own economies and are less
concerned with environmental issues.
– Nonetheless, there is a consensus that such environmental
damage should be counted against a country’s GDP since it is
not sustainable production and may impact future growth.
 What are the Limitations of Using GDP?

• Increases in Product Quality

– As technology advances, producers are able to offer increasingly
better products for reduced production costs. For example,
smartphone manufacturers may be producing phones with
better cameras, more advanced processors, and higher-quality
displays.

– Thus, consumers experience higher utility than before without

being faced with proportionately inflated prices. Such
advancements are not counted in GDP since relative utility gains
are difficult to quantify.
What are the Limitations of Using GDP?
 Green Gross Domestic
Product (GGDP)
• GGDP essentially penalizes a country for employing
manufacturing practices that harm the environment. Such
practices are seen as unsustainable, and, thus, many believe that
they should be counted against a country’s GDP.
Gross National Happiness
Gross National Happiness
Gross National Happiness