This document outlines key concepts related to understanding the Philippine economy. It discusses the main sectors of the economy (public and private), the government's role in managing fiscal and monetary policy, the four sectors of the economy (households, businesses, government, foreign), macroeconomic goals, the economic cycle and its phases, types of economic indicators, and several Philippine economic organizations. The overall document provides an introduction and overview to important economic concepts for analyzing and understanding the Philippine economy.
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Understanding Philippine Economy
1. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Chapter 2
UNDERSTANDING PHILIPPINE ECONOMY
1st Semester, S.Y 2014 – 2015
2. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
A. Economy Defined
B. Two Parts of the Economy: Public Sector and Private Sector
C. Government and the Economy
D. Economic Functions of the Government
E. Fiscal and Monetary Policy
F. Four Sectors of the Economy
G. Expanded Circular Flow Diagram: Three-Sector Model
H. Macroeconomic Goals
I. Economic Cycle
J. Phases of Economic Cycle
K. Economic Indicator
L. Classifications of Economic Indicators
M. Three Sectors of the Economy
N. Economy of the Philippines: Facts and Statistics
O. National Economic Development Authority (NEDA)
P. Bangko Sentral ng Pilipinas (BSP)
Q. The Philippine Development Plan
Course Outline
3. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Economy
An economy consists of the economic system of a
country or other area; the labor, capital and land
resources; and the manufacturing, trade, distribution, and
consumption of goods and services of that area.
An economy may also be described as a spatially limited
and social network where goods and services are
exchanged according to demand and supply between
participants by barter or a medium of exchange with a
credit or debit value accepted within the network.
4. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
In economics, the private sector is that part of the
economy, sometimes referred to as the citizen sector, which
is run by private individuals or groups, usually as a means of
enterprise for profit, and is not controlled by the state.
The public sector, sometimes referred to as the state
sector, is a part of the state that deals with either the
production, delivery and allocation of goods and services by
and for the government or its citizens, whether
national, regional or local/municipal. Examples of public
sector activity range from delivering social security,
administering urban planning and organizing
national defense.
.
Two Parts of the Economy:
Public Sector vs. Private Sector
5. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Private Sector is part of the economy where firms in
response to the demand or consumers’ needs and wants
make production decisions. In the private sector individuals
are allowed to own the factor of production.
Public Sector is responsible for the supply of public goods
& services and merit goods. These goods are provided free
when used and are paid by taxes e.g. roads, healthcare,
street lighting. The central or local government makes
decisions regarding resource allocation in the public sector.
In public sector, the state owns a significant proportion of
production factors.
Two Parts of the Economy:
Public Sector vs. Private Sector
6. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Government is a crucial institution in any economy. It acts
as a consumer as well as a producer and taken as a whole,
it becomes the largest single “business” in a nation. When
asked about the government, a lot of us would think of the
nation’s President and other politicians. However, we must
consider the government as a whole consisting of the
various offices, departments, and bureaus rather than the
individuals representing said sectors.
The government is also called the public sector, wherein
decision making is collective. The government’s role is to
replace individual decisions with collective decisions that
make everybody better off.
The Government and the Economy
7. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Government’s Role in Managing the
Economy
In every country, the government takes steps to help the
economy achieve the goals of growth, full employment,
and price stability. In the United States, the government
influences economic activity through two approaches:
monetary policy and fiscal policy. Through monetary
policy, the government exerts its power to regulate the
money supply and level of interest rates. Through fiscal
policy, it uses its power to tax and to spend.
8. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
1. Allocative Role – Because individual choices are not
always in the group’s best interest, the government
must improve the allocation of resources to be able to
maximize economic welfare. This also ensures the
proper utilization of scarce resources.
2. Distributive Role – Aside from allocating the
resources, another issue is on the equitable
distribution of the resources. Considering all the
members of the economy, other questions to be
pondered upon is on who gets the resource, how much
of it should be given, and when shall it be given?
Economic Functions of the Government
9. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
3. Regulatory Role – For the market economy to
function efficiently, there needs to be the formulation
and proper implementation of policies and laws to
guide and regulate the individual units in the market
economy. This is significant because of the existence
of market failures.
4. Stabilization Role – The government also has the role
to moderate inflation and unemployment effects on the
economy. Stabilization includes finding a tolerable
balance between and among the various
macroeconomic problems, such as balancing the rate
of inflation with that of unemployment.
Economic Functions of the Government
10. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Fiscal Policy and Monetary Policy
Fiscal policy involves the use of government
spending, taxation and borrowing to affect the level
and growth of aggregate demand, output and jobs or
influence macroeconomic conditions.
Monetary Policy is the process by which the
monetary authority of a country controls the supply of
money, often targeting a rate of interest for the
purpose of promoting economic growth and stability.
11. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Four Sectors of the Economy
1. Household (Consumers)
Consuming unit of the economy
2. Business Firms (Producers)
Producing unit of the economy
3. Government (Public sector)
Implementer of economic policies
4. Foreign Sector
International trade and net exports
12. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
An Expanded Circular – Flow Diagram:
How Money Flows Through the Economy
13. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
A circular flow of funds connects the four sectors of the
economy households, firms, government, and the rest of the
world—via three types of markets: the factor markets, the
markets for goods and services, and the financial markets.
Funds flow from firms to households in the form of wages,
profit, interest, and rent through the factor markets. After
paying taxes to the government and receiving government
transfers, households allocate the remaining income—
disposable income—to private savings and consumer
spending. Via the financial markets, private savings and
funds from the rest of the world are channeled into
investment spending by firms, government borrowing, foreign
borrowing and lending, and foreign transactions of stocks.
An Expanded Circular – Flow Diagram:
How Money Flows Through the Economy
14. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
In turn, funds flow from the government and households to
firms to pay for purchases of goods and services. Finally,
exports to the rest of the world generate a flow of funds into
the economy and imports lead to a flow of funds out of the
economy. We can determine the total flow of funds by adding
all spending—consumer spending on goods and services,
investment spending by firms, government purchases of
goods and services, and exports—and then subtracting the
value of imports. This is the value of all the final goods and
services produced in a country.
An Expanded Circular – Flow Diagram:
How Money Flows Through the Economy
15. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
1. To maintain full employment
2. To ensure price stability
3. To achieve high level of economic growth
4. To achieve favorable balance of trade
Macroeconomic Goals
16. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Full employment a condition of the national economy,
where every member of the labor force who wants to
work is able to find work. This goal is commonly
indicated by the employment of labor resources
(measured by the unemployment rate). The economy
benefits from full employment because resources
produce the goods that satisfy the wants and needs
that lessens the scarcity problem.
It is also described either as absolutely 0% rate of
unemployment or as the level of employment rates
when there is no cyclical unemployment.
Full employment
17. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Price stability is achieved by avoiding or limiting
fluctuations in price level of goods and services. Stability
seeks to avoid the recessionary declines and inflationary
expansions of business cycles. The goal of price stability
is to prevent increases in the general price level known as
inflation, as well as decreases in the general price level
known as deflation. Maintaining stability is beneficial
because it means uncertainty and disruptions in the
economy are avoided. It means consumers and
businesses can safely pursue long-term consumption and
production plans. Policies makers are usually most
concerned with price stability and the inflation rate.
Price Stability
18. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Economic growth is achieved by increasing the
economy's ability to produce goods and services. This
goal is best indicated by measuring the growth rate of
production. If the economy produces more goods this
year than last, then it is growing.
Economic growth is also indicated by increases in the
quantities of the economic resources used to produce
goods. With economic growth, society gets more goods
that can be used to satisfy more wants and needs--
people are better off; living standards rise; and scarcity
is less of a problem.
Economic Growth
19. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
The four macroeconomic goals of full employment,
stability, economic growth, and balance of trade are
widely considered to be beneficial and worth pursuing.
Each goal, achieved by itself, improves the overall well-
being of society. Greater employment is typically better
than less. Stable prices are better than inflation.
Economic growth is better than stagnation. However, the
pursuit of one goal often restricts attainment of others.
For example, policies that promote economic growth
might create unemployment or policies that improve
stability might limit economic growth. Macroeconomic
goals are also often in conflict with the microeconomic
goals of efficiency and equity.
Tradeoffs of Macroeconomic Goals
20. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Economic Cycle (Business Cycle)
Economic cycle refers to the recurrent ups and downs in the level
of economic activity, which extend over several years. It describes
the fluctuations in the economy between growth (expressed in
rising real GDP) and stagnation (expressed in falling real GDP).
21. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Phases of Economic Cycle
1. Peak or prosperity phase
2. Contraction or recession phase
3. Trough or depression phase
4. Expansion or recovery phase
22. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Peak or prosperity phase. At the peak of a business
cycle, real GDP is at a temporary high. Real output in the
economy is at a high level, unemployment is low and
domestic output may be at its capacity. Inflation also may
be high.
Contraction or recession phase. If real GDP decreases,
the economy is said to be in a contraction. Real output is
decreasing and the unemployment rate is rising. As
contraction continues, inflation pressure fades. If the
recession is prolonged, price may decline (deflation). The
government determinant for a recession is two consecutive
quarters of declining output.
Phases of Economic Cycle
23. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Trough or depression phase. The low point in real
GDP, just before it begins to turn up. Output and
unemployment are “bottom out”. This phase may be
short-lived or prolonged. There is no precise decline in
output at which a serious recession becomes a
depression.
Expansionary or recovery. The recovery is the period
when real GDP is rising; it begins at the trough and ends
at the initial peak. Real output in the economy is
increasing and the unemployment rate is declining. It is
the upswing part of the cycle.
Phases of Economic Cycle
24. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Economic indicators provide a snapshot of the
economy's health. Just as a doctor checks the vital
signs of a patient, an economist might check the vital
signs of the economy by looking at Gross Domestic
Product , Consumer Price Index, or the unemployment
rate.
An economic indicator is a statistic to determine the
state of economic activity. It allows analysis of
economic performance and predictions of future
performance. Economic indicators include various
indices, earnings reports, and economic summaries.
Economic Indicator
25. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Economists categorize economic indicators as leading,
lagging or coincident. These categories help them see
where the economy is in terms of the business cycle, which
shows the rising and falling of economic conditions over
time.
1. Leading indicators anticipate the direction in which the
economy is headed.
2. Coincident indicators provide information about the
current status of the economy.
3. Lagging indicators change months after a downturn or
upturn in the economy has begun and help economists
predict the duration of economic downturns or upturns.
Categories of Economic Indicator
26. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Common stock or share prices
New orders for consumer durables
Money supply
Building permits
Business inventories
Index of consumer expectations
Leading Economic Indicators
27. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Gross Domestic Product
industrial production
personal income less transfer payments
Manufacturing and trade sales
Employment levels
Employees on nonagricultural payrolls
Coincident Economic Indicators
28. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
The Gross National Product (GNP)
The average duration of unemployment
The value of outstanding commercial and industrial loans
The change in the Consumer Price Index
The change in labor cost per unit of output
The ratio of manufacturing and trade inventories to sales
The ratio of consumer credit outstanding to personal
income
The average prime rate (interest rates) charged by banks
Lagging Economic Indicators
29. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Selected Economic Indicators Defined
1. Gross Domestic Product (GDP)
2. Gross National Product (GDP)
3. Unemployment Rate
4. Per Capita Income
5. Inflation Rate
6. Population rate
7. Net Exports
8. Imports and Exports
30. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Economic Indicators Defined
Gross Domestic Product (GDP) is the broadest measure
of aggregate economic activity encompassing every
measure of the economy, measuring the total value of final
goods and services produced during a specific period.
Gross National Product (GNP) is the total market value of
all final goods and services produced by the citizens of a
country in a given year.
Per Capita Income (PCI) refers to income per head. PCI is
obtained by dividing the national income by the number of
population.
31. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Unemployment rate is a measure of the prevalence of
unemployment and it is calculated as a percentage by
dividing the number of unemployed individuals by all
individuals currently in the labor force
Inflation rate is a measure of inflation, the rate of increase
of a price index. It is the percentage rate of change in price
level over time. The rate of decrease in the purchasing
power of money is approximately equal.
Consumer Price Index is a measure of the average price
level of a fixed basket of goods and services purchased by
consumers. changes in the CPI represent the rate of
inflation.
Economic Indicators Defined
32. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Trade balance measures the difference between exports
and imports of both tangible goods and services. The level
of the international trade balance, as well as changes in
exports and imports, indicate trends in foreign trade.
Exports are sales of domestically produced goods which
are by a domestic country sold to the foreign countries or
rest of the world
Imports are sales of foreign products bought by a domestic
country from the rest of the world
Exchange rate is the rate at which one currency will be
exchanged for another. It is also regarded as the value of
one country’s currency in terms of another currency.
Economic Indicators Defined
33. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Poverty threshold (poverty line) is the minimum level of
income deemed adequate in a given country. The poverty
threshold is useful as an economic tool with which to
measure such people and consider socioeconomic reforms
such as welfare and unemployment insurance to reduce
poverty.
Government budget deficit is the amount by which some
measure of government revenues falls short of some
measure of government spending.
Economic Indicators Defined
34. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Three Economic Sectors of the
Economy
1. Primary Sector (Agriculture Sector)
2. Secondary Sector (Industrial Sector)
3. Tertiary Sector (Service Sector)
35. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Primary Sector (Agriculture Sector)
Primary sector is the sector of an economy making
direct use of natural resources. This includes agriculture,
forestry and fishing, mining, and extraction of oil and gas.
The primary sector of the economy extracts or harvests
products from the earth. The primary sector includes the
production of raw material and basic foods. Activities
associated with the primary sector include agriculture
(both subsistence and commercial), mining, forestry,
farming, grazing, hunting and gathering, fishing, and
quarrying. The packaging and processing of the raw
material associated with this sector is also considered to
be part of this sector.
36. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Secondary Sector (Industrial Sector)
Secondary sector of the economy or industrial sector
includes those economic sectors that create a processed,
tangible product: production and construction.
This sector generally takes the output of the primary sector
and manufactures finished goods. These products are then
either exported or sold to domestic consumers and to
places where they are suitable for use by other businesses.
This sector is often divided into light industry and heavy
industry. Many of these industries consume large quantities
of energy and require factories and machinery to convert
the raw materials into goods and products. They also
produce waste materials and waste heat that may pose
environmental problems or cause pollution.
37. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Tertiary Sector (Services Sector)
Tertiary sector of the economy is the service
industry. This sector provides services to the
general population and to businesses. Activities
associated with this sector include retail and
wholesale sales, transportation and distribution,
entertainment (movies, television, radio, music,
theater, etc.), restaurants, clerical services, media,
tourism, insurance, banking, healthcare, and law.
38. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Goldman Sachs estimates that by the year 2050, the
Philippines will be the 14th largest economy in the
world, Goldman Sachs also included the Philippines in its
list of the Next Eleven economies.
According to HSBC, the Philippine economy will become the
16th largest economy in the world, 5th largest economy
in Asia and the largest economy in the Southeast
Asian region by 2050.
Economy of the Philippines
39. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
The Philippines is considered as a newly industrialized
country, which has been transitioning from being one
based on agriculture to one based more on services and
manufacturing.
The 40th largest in the world, according to
2013 International Monetary Fund statistics, and is also
one of the emerging markets in the world.
According to the World Bank ICP 2011, the estimated
2011 GDP (purchasing power parity) was $543.7 billion.
Economy of the Philippines
40. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Primary exports include semiconductors and electronic
products, transport equipment, garments, copper products,
petroleum products, coconut oil, and fruits. Major trading
partners include the United States, Japan, China,
Singapore, South Korea, the Netherlands, Hong
Kong, Germany, Taiwan, and Thailand. The Philippines has
been named as one of the Tiger Cub Economies together
with Indonesia, Malaysia and Thailand. It is currently one of
Asia's fastest growing economies. However, major problems
remain, mainly having to do with alleviating the wide income
and growth disparities between the country's different regions
and socioeconomic classes, reducing corruption, and
investing in the infrastructure necessary to ensure future
growth.
Economy of the Philippines
41. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Capital Manila
Currency Philippine Peso (PHP)
GDP
$272.018 billion nominal (2013), $456.418 billion
PPP (2013)
GDP growth 7.2% (2013), 5.7% (1Q 2014)
GDP per Capita $2,790 (2013) (nominal 126th)
GDP by sector
agriculture (12.3%), industry (33.3%), services
(54.4%) (2011)
Inflation (CPI) 2.1% (Aug 2013)
Population 96.71 milion (2012)
Population below poverty line less than $1.25 / 10.41% (2009)
less than $2 / 25.2% (2012)
Poverty rate 22.30%
Gini coefficient 43.0 (2009)
Labor Force by Occupation
services (52%) agriculture (33%), industry (15%)
(2010 est.)
Unemployment rate 7.5% (January 2014)
Philippine Economy (Statistics)
42. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Region
GRDP (in
billion
PHP)
% of GRDP
Agriculture
(in billion
PHP)
% of GRDP
Industry
(in billion
PHP)
% of GRDP
Services
(in billion
PHP)
% of GRDP
per capita
GRDP
Metro Manila 3,479.91 35.744 17.891 0.51 591.035 16.98 2,870.98 82.5 288,062
Cordillera 210.079 2.158 21.082 10.04 116.522 55.47 72.474 34.5 127,614
Ilocos 293.918 3.019 75.097 25.55 79.448 27.03 139.372 47.42 71,076
Cagayan Valley 167.492 1.72 71.769 42.85 17.805 10.63 77.919 46.52 51,100
Central Luzon 882.806 9.068 145.975 16.54 373.25 42.28 363.58 41.18 85,186
CALABARZON 1,644.84 16.895 108.94 6.62 1,015.50 61.74 520.401 31.64 126,589
MIMAROPA 176.176 1.81 48.028 27.26 65.135 36.97 63.013 35.77 62,995
Bicol 206.619 2.122 57.728 27.94 44.855 21.71 104.036 50.35 37,526
Western Visayas 395.417 4.062 115.613 29.24 66.238 16.75 213.565 54.01 54,870
Central Visayas 601.88 6.182 51.89 8.62 213.968 35.55 336.023 55.83 86,880
Eastern Visayas 242.594 2.492 58.434 24.09 104.207 42.96 79.952 32.96 58,335
Zamboanga Peninsula 200.883 2.063 66.206 32.96 51.762 25.77 82.915 41.28 57,815
Northern Mindanao 467.1 4.798 115.283 31.4 102.251 27.85 149.566 40.74 93,628
Davao Region 408.45 4.195 104.792 25.66 112.821 27.62 190.837 46.72 89,552
SOCCSKSARGEN 261.548 2.687 97.932 37.44 71.445 27.32 97.171 35.24 62,080
Caraga 99.037 1.017 30.248 27.56 26.583 24.22 52.934 48.22 44,472
Muslim Mindanao 86.048 0.884 58.287 67.74 3.641 4.23 24.12 28.03 26,004
Total 9,735.52 100 1,245.20 12.79 3,056.47 31.4 5,433.86 55.81 103,366
Gross Regional Domestic Product (GRDP) for the year 2013
Gross Domestic Product (Regional
Accounts)
43. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Exports $53.98 billion (2013)
Export goods semiconductors and electronic products, transport equipment,
garments, copper products, petroleum products, coconut oil,
fruits
Main export
partners
Japan 19.0% ; United States 14.2% ; China 11.8%; Hong
Kong 9.2%
South Korea 5.5%; Thailand 4.7% (2012 est.)
[
Imports $61.71 billion (2013)
Import goods electronic products, mineral fuels, machinery and transport
equipment, iron and steel, textile fabrics, grains, chemicals,
plastic
Main import
partners
United States 11.5%; China 10.8%; Japan 10.4%; South
Korea 7.3%
Singapore 7.1%; Thailand 5.6%; Saudi Arabia 5.6%;
Indonesia 4.4%
Malaysia 4.0% (2012 est.)
Exports and Imports
44. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Main industries
electronics assembly, Business Process
Outsourcing, garments, footwear, pharmaceuticals,
chemicals, wood products, food processing, petroleum
refining, fishing
Exports $53.98 billion (2013)
Export goods
semiconductors and electronic
products, transport equipment,garments, copper product
s,petroleum products, coconut oil,fruits
Imports $61.71 billion (2013)
Import goods
electronic products, mineral fuels, machinery and
transport equipment, iron and steel, textile fabrics,
grains, chemicals, plastics
Trade Orgnizations
APEC, ASEAN, WTO, EAS, Asian Development
Bank, ASEAN Plus Three, and others
Classification (WB) Lower middle income
Philippine Economy (Statistics)
45. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Budget Allocation
Millions of Pesos
(PHP)
Millions of US
Dollars
(USD)
%
Department of Education ₱238,800 $5,513.7 13.15
Department of Public Works and
Highways
126,400 2,918.5 6.96
Department of National Defense 108,100 2,496.0 5.95
Department of Interior and Local
Government
99,800 2,304.3 5.50
Department of Agriculture 61,400 1,417.7 3.38
Department of Social Welfare and
Development
48,800 1,126.8 2.69
Department of Health 45,800 1,057.5 2.52
Department of Transportation and
Communications
34,700 801.2 1.91
State Universities and Colleges 25,800 595.7 1.42
Department of Finance 23,600 544.9 1.30
Department of Environment and Natural
Resources
17,500 404.1 0.9
Government Budget
2012 Philippine national government budget
46. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Year
GDP growth
in percent
(Constant
Prices, Base
Year=2000)
GDP (I Php
Billion)
GDP (In
USD
Billion)
GDP per
capita (In
USD,
Current
Prices)
GDP (In
USD
Billion,
PPP)
GDP per
capita (in
USD, PPP)
Peso vs
Dollar
(Exchange
Rate)
1985 -7.31 633.6 34.1 623 77.9 1426 18.61
1986 3.42 674.6 33.1 591 82.4 1471 20.39
1987 4.31 756.5 36.8 641 88.4 1540 20.57
1988 6.75 885.5 42 715 97.6 1663 21.09
1989 6.21 1025.3 47.3 786 107.6 1791 21.7
1990 3.04 1190.5 48.9 796 115.2 1873 24.33
1991 -0.58 1379.9 50.2 797 118.6 1882 27.48
1992 0.34 1497.5 58.7 912 121.8 1891 25.51
1993 2.12 1633.6 60.2 914 127.1 1929 27.12
1994 4.39 1875.7 71 1052 135.5 2007 26.42
1995 4.68 2111.7 83.7 1224 144.8 2118 25.24
1996 5.85 2406.4 93.5 1336 156.1 2232 26.22
1997 5.19 2688.7 92.8 1297 167.1 2336 28.98
1998 -0.58 2952.8 73.8 1009 168.1 2297 40.02
1999 3.08 3244.2 83 1110 175.8 2352 39.09
2000 4.41 3580.7 81 1053 187.5 2437 44.19
Gross Domestic Product
47. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Year
GDP growth
in percent
(Constant
Prices, Base
Year=2000)
GDP (I Php
Billion)
GDP (In
USD
Billion)
GDP per
capita (In
USD,
Current
Prices)
GDP (In
USD
Billion,
PPP)
GDP per
capita (in
USD, PPP)
Peso vs
Dollar
(Exchange
Rate)
2001 2.89 3888.8 76.3 971 197.3 2511 50.99
2002 3.65 4198.3 81.4 1014 207.8 2591 51.6
2003 4.97 4548.1 83.9 1025 222.7 2720 54.2
2004 6.7 5120.4 91.4 1093 242.7 2905 56.04
2005 4.78 5677.8 103.1 1209 261 3061 55.09
2006 5.24 6271.2 122.2 1405 283.5 3255 51.31
2007 6.62 6892.7 149.4 1684 309.9 3493 46.15
2008 4.15 7720.9 173.6 1919 329 3636 44.47
2009 1.15 8026.1 168.5 1851 335.4 3685 47.64
2010 7.63 9003.5 199.6 2155 365.3 3945 45.11
2011 3.64 9706.3 224.1 2379 386.1 4098 43.31
2012 6.82 10564.9 250.2 2611 419.6 4380 42.23
2013 7.16 11546.1 272.2 2792 454.3 4660 42.45
Gross Domestic Product
48. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
National Economic Development
Authority
National Economic and Development (NEDA) is an
independent cabinet-level agency of the Philippine
government responsible for economic development and
planning.
As the central planning body of the government, the NEDA
is the responsible for the formulation and updating of long
and short-term national development plans as well as for the
identification and coordination of economic policies and
measures that will bring about the optimal use of scares
resources, thus affording maximum development in the
Philippines.
49. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
History of NEDA
Presidential Decree No. 1 – issued on September
24, 1972, otherwise known as as the Integrated
Reorganization Plan (IRP), was the provision for an
integrated organizational complex for development
planning program implementation to correct the
deficiencies of the of the system.
P.D 107 – as promulgated, dated January 24, 1973,
creating the NEDA as mandated in the 1973
Constitution. Dr. Gerardo Sicat served as the first
director general when NEDA was established in
1973.
50. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
History of NEDA
Executive Order No. 5 – was issued by Pres.
Corazon Aquino on March 12, 1986, directing a
government-wide reorganization to promote
economy, efficiency and effectiveness in the delivery
of public services
Executive Order No. 230 – was issued on July 22,
1987 , reorganizing the NEDA. Implementation of this
EO was completed on Feb. 16, 1988 when the NEDA
commenced operations under its reorganized setup
51. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Functions of NEDA
1. Advise the President on matters concerning the
status and progress of the economy.
2. Formulate, in consultation with the private sector and
other appropriate government agencies, definite
inconsistent long range and annual economic social
development plans and programs.
3. Coordinate the formulation and implementation of
national policies on fiscal, budgetary, credit, tariff,
investment, production, price, manpower, trade
population,, land use, water resources use, and other
economic matters.
52. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Functions of NEDA
4. Analyze, coordinate and initiate, with the approval of
the President, major development projects requiring
the utilization of funds available to the government.
5. Coordinate the implementation of approved national
and and regional development plans and programs.
6. Coordinate and integrate foreign economic and
technical assistance programs from United Nations
economic agencies, international and economic
organizations, foreign government and private
organizations dealing with the government and its
agencies and instrumentalities.
.
53. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Functions of NEDA
7. Establish and maintain working relationships with the
various international financial institutions and assist
government and private entities in tapping foreign
resources for credit or other forms of assistance.
8. Establish priorities and programs in the utilization of
public funds, manpower, equipment and other
available resources.
9. Review and recommend to the President for approval
the Investment Priority Plan, Export Priorities Plan
and Public Utilities prepared by the Board of
Investment.
54. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
Functions of NEDA
10.Coordinate statistical activities of all agencies, formulate
statistical standards and methodology, and prescribe
their use by the government agencies.
11.Provide general policies for the operations of the
agencies attached to and under administrative
supervision of NEDA.
55. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
The Bangko Sentral ng Pilipinas is the central bank of
the Philippines with the main function of implementing
monetary policy aimed at influencing money supply,
consistent with its primary objective to maintain price
stability.
It was rechartered on July 3, 1993, pursuant to the
provision of the 1987 Philippine Constitution and the New
Central Bank Act of 1993. The BSP was established on
January 3, 1949, as the country’s central monetary
authority.
Bangko Sentral ng Pilipinas (BSP)
56. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
1. Liquidity management. Formulate and implement
monetary policy aimed at influencing money supply,
consistent with its primary objective to maintain price
stability.
2. Currency issue. The BSP has the exclusive power to
issue the national currency. All notes and coins issued
by the BSP are fully guaranteed by the Government and
are considered legal tender for all private and public
debts.
3. Lender of last resort. Extend discounts, loans and
advances to banking institutions for liquidity purposes.
Roles and Functions of BSP
57. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
4. Financial Supervision. Supervise banks and
exercise regulatory powers over non-bank institutions
performing quasi-banking functions.
5. Management of foreign currency reserves.
Maintain sufficient international reserves to meet any
foreseeable net demands for foreign currencies in
order to preserve the international stability and
convertibility of the Philippine peso.
6. Determination of exchange rate policy. Determine
the exchange rate policy of the Philippines. Currently,
the BSP adheres to a market-oriented foreign
exchange rate policy.
Roles and Functions of BSP
58. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
8. Be the banker, financial advisor and official
depository of the Government, its political
subdivisions and instrumentalities and GOCCs.
9. Reasonably responsible for the faults of the people
behind it get the blame of the opposition to which it is
grouped.
Roles and Functions of BSP
59. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
The Philippine Development Plan
(2011 – 2016)
The Plan, anchored on President Benigno S.
Aquino III’s 16-point “Social Contract with the
Filipino People,” envisions inclusive growth for
the country. Inclusive growth means growth
that is shared by all and opposed to the trickle
down, jobless growth that we have seen over
the recent years. The plan is prepared by
NEDA.
60. BACHELOR OF ARTS IN ECONOMICS PA 118 – ECONOMIC SYSTEM AND PUBLIC ADMINISTRATION
Pangasinan State University
Social Science Department – PSU Lingayen
The Philippine Development Plan
(2011 – 2016)
The Plan comprises 10 chapters, namely:
1. Introduction: In Pursuit of Inclusive Growth
2. Macroeconomic Policy
3. Competitive Industry and Services Sectors
4. Competitive and Sustainable Agriculture and Fisheries Sector
5. Accelerating Infrastructure Development
6. Towards a Dynamic and Resilient Financial Sector
7. Good Governance and the Rule of Law
8. Social Development
9. Peace and Security
10. Conservation, Protection and Rehabilitation of the
Environment and Natural Resources Towards Sustainable
Development
Notes de l'éditeur
As discussed earlier in microeconomics, particularly the discussions in demand and supply, it mentions that the market dictates what, how and for whom to produce. However, there are some goods and services which cannot be properly valued by the market alone. This is called a Market Failure that may restrict the efficient use of resources in the economy. Market failure is caused by the production of public goods and the externalities that come with the production of various goods and services.
Public goods are communal in nature, which means individuals cannot hinder others from benefitting from a particular good or service. This brings about the Free- Rider Dilemma, where nobody would like to invest or spend on a project since they are hoping someone else would do it and they could just avail of a free ride.
The production of goods and services produce externalities that keep the market from achieving allocative efficiency. Externalities exist when an economic unit falls short of the costs and benefits of its choices. Externalities are sometimes called “spillovers” or “neighborhood effects” because the costs or benefits of an individual’s choice spills over to others or is shared with individual neighbors. Presently, a very controversial external cost (supposed to be incurred by manufacturers but is spilled-over to others) is that of environmental costs. There are some factories or industries that dump their chemical waste in the river without considering the harm they may bring to the environment and also to the health of the people living near the river.
A circular flow of funds connects the four sectors of the
economy—households, firms, government, and the rest of the
world—via three types of markets: the factor markets, the markets
for goods and services, and the financial markets. Funds flow
from firms to households in the form of wages, profit, interest, and
rent through the factor markets. After paying taxes to the government
and receiving government transfers, households allocate the
remaining income—disposable income—to private savings and
consumer spending. Via the financial markets, private savings and
funds from the rest of the world are channeled into investment
spending by firms, government borrowing, foreign borrowing and
lending, and foreign transactions of stocks. In turn, funds flow
from the government and households to firms to pay for purchases
of goods and services. Finally, exports to the rest of the
world generate a flow of funds into the economy and imports lead
to a flow of funds out of the economy. We can determine the total
flow of funds by adding all spending—consumer spending on
goods and services, investment spending by firms, government
purchases of goods and services, and exports—and then subtracting
the value of imports. This is the value of all the final
goods and services produced in the United States—
The Expanded Circular-Flow Diagram Figure 10.2 on the next page is a revised and
expanded circular-flow diagram. This diagram shows only the flows of money in the
economy, but is expanded to include extra elements that were ignored in the interest of
simplicity in the simple circular-flow diagram. The underlying principle that the inflow
of money into each market or sector must equal the outflow of money coming
from that market or sector still applies in this model.
In Figure 10.2, the circular flow of money between households and firms illustrated
in Figure 10.1 remains. In the product markets, households engage in consumer
spending, buying goods and services from domestic firms and from firms in the rest
of the world. Households also own factors of production—land, labor, and capital.
They sell the use of these factors of production to firms, receiving rent, wages, and interest
payments in return. Firms buy, and pay households for, the use of those factors
of production in factor markets, represented to the right of center in the diagram.
Most households derive the bulk of their income from wages earned by selling labor.
Some households derive additional income from their indirect ownership of the physical
capital used by firms, mainly in the form of stocks—shares in the ownership of a
company—and bonds—loans to firms in the form of an IOU that pays interest. In
other words, the income households receive from the factor markets includes profit
distributed to company shareholders and the interest payments on any bonds that they
hold. Finally, households receive rent from firms in exchange for the use of land or
structures that the households own. So in factor markets, households receive income
in the form of wages, profit, interest, and rent via factor markets Households spend most of the income received from factors of production on
goods and services. However, in Figure 10.2 we see two reasons why the markets for
goods and services don’t in fact absorb all of a household’s income. First, households
don’t get to keep all the income they receive via the factor markets. They must pay part
of their income to the government in the form of taxes, such as income taxes and sales
taxes. In addition, some households receive government transfers—payments that the
government makes to individuals without expecting a good or service in return. Unemployment
insurance payments are one example of a government transfer. The total income
households have left after paying taxes and receiving government transfers is
disposable income.
The second reason that the markets for goods and services do not absorb all
household income is that many households set aside a portion of their income for
private savings. These private savings go into financial markets where individuals,
banks, and other institutions buy and sell stocks and bonds as well as make loans. As
Figure 10.2 shows, the financial markets (on the far right of the circular flow diagram)
also receive funds from the rest of the world and provide funds to the government,
to firms, and to the rest of the world.
Before going further, we can use the box representing households to illustrate an
important general characteristic of the circular -flow diagram: the total sum of flows of
money out of a given box is equal to the total sum of flows of money into that box. It’s
simply a matter of accounting: what goes in must come out. So, for example, the total
flow of money out of households—the sum of taxes paid, consumer spending, and private
savings—must equal the total flow of money into households—the sum of wages,
profit, interest, rent, and government transfers.
Now let’s look at the other inhabitants in the circular -flow diagram, including the
government and the rest of the world. The government returns a portion of the money
it collects from taxes to households in the form of government transfers. However, it
uses much of its tax revenue, plus additional funds borrowed in the financial markets
through government borrowing, to buy goods and services. Government purchases
of goods and services, the total of purchases made by federal, state, and local governments,
includes everything from military spending on ammunition to your local public
school’s spending on chalk, erasers, and teacher salaries.
The rest of the world participates in the U.S. economy in three ways. First, some of
the goods and services produced in the United States are sold to residents of other
countries. For example, more than half of America’s annual
wheat and cotton crops are sold abroad. Goods and services sold
to other countries are known as exports. Export sales lead to a
flow of funds from the rest of the world into the United States to
pay for them. Second, some of the goods and services purchased
by residents of the United States are produced abroad. For example,
many consumer goods are now made in China. Goods and
services purchased from residents of other countries are known
as imports. Import purchases lead to a flow of funds out of the
United States to pay for them. Third, foreigners can participate
in U.S. financial markets. Foreign lending—lending by foreigners
to borrowers in the United States and purchases by foreigners of
shares of stock in American companies—generates a flow of
funds into the United States from the rest of the world. Conversely,
foreign borrowing—borrowing by foreigners from U.S. lenders and purchases
by Americans of stock in foreign companies—leads to a flow of funds out of the United
States to the rest of the world.
Notice that like households, firms also buy goods and services in our economy. For
example, an automobile company that is building a new factory will buy investment
goods—machinery like stamping presses and welding robots—from companies that
manufacture these items. It will also accumulate an inventory of finished cars in preparation
for shipment to dealers. Inventories, then, are goods and raw materials that firms hold to facilitate their operations. The national accounts count this investment
spending—spending on new productive physical capital, such as machinery and buildings,
and on changes in inventories—as part of total spending on goods and services.
You might ask why changes in inventories are included in investment spending—
finished cars aren’t, after all, used to produce more cars. Changes in inventories of finished
goods are counted as investment spending because, like machinery, they change
the ability of a firm to make future sales. So spending on additions to inventories is a
form of investment spending by a firm. Conversely, a drawing -down of inventories is
counted as a fall in investment spending because it leads to lower future sales. It’s also
important to understand that investment spending includes spending on the construction
of any structure, regardless of whether it is an assembly plant or a new
house. Why include the construction of homes? Because, like a plant, a new house
produces a future stream of output—housing services for its occupants.
Suppose we add up consumer spending on goods and services, investment spending,
government purchases of goods and services, and the value of exports, then subtract
the value of imports. This gives us a measure of the overall market value of the
goods and services the economy produces. That measure has a name: it’s a country’s
gross domestic product. But before we can formally define gross domestic product, or
GDP, we have to examine an important distinction between classes of goods and services:
the difference between final goods and services versus intermediate goods and services.
Full employment is achieved when all available resources (labor, capital, land, and entrepreneurship) are used to produce goods and services. This goal is commonly indicated by the employment of labor resources (measured by the unemployment rate). However, all resources in the economy-labor, capital, land, and entrepreneurship--are important to this goal. The economy benefits from full employment because resources produce the goods that satisfy the wants and needs that lessens the scarcity problem. If the resources are not employed, then they are not producing and satisfaction is not achieved.
refers to economy-wide fluctuations in production or economic activity over several months or years.
Business cycle shows how an economy experiences up-and-down swings in the years.
If real GDP is on a roller-coaster—rising and falling and rising and falling—the economy is said to be incurring a business cycle.
Economists usually talk about four or five phases of the business cycle. Five phases are identified here and in Exhibit 12-7.
The phases of a business cycle include the peak, contraction, trough, recovery, and expansion. A business cycle is measured from peak to peak.
1. Peak. At the peak of a business cycle, real GDP is at a temporary high (Q1 in
Exhibit 12-7).
2. Contraction. If real GDP decreases, the economy is said to be in a contraction. If real GDP declines for two consecutive quarters (with four quarters in a year),
3. Trough. The low point in real GDP, just before it begins to turn up, is called the trough of the business cycle.
4. Recovery. The recovery is the period when real GDP is rising; it begins at the trough and ends at the initial peak. For
example, the recovery in Exhibit 12-7 extends from the trough to where real
GDP is again at Q1.
5. Expansion. The expansion refers to increases in real GDP beyond the recovery. it refers to increases
in real GDP above Q1.
An entire business cycle is measured from
peak to peak.
refers to economy-wide fluctuations in production or economic activity over several months or years.
Business cycle shows how an economy experiences up-and-down swings in the years.
If real GDP is on a roller-coaster—rising and falling and rising and falling—the economy is said to be incurring a business cycle.
Economists usually talk about four or five phases of the business cycle. Five phases are identified here and in Exhibit 12-7.
The phases of a business cycle include the peak, contraction, trough, recovery, and expansion. A business cycle is measured from peak to peak.
1. Peak. At the peak of a business cycle, real GDP is at a temporary high (Q1 in
Exhibit 12-7).
2. Contraction. If real GDP decreases, the economy is said to be in a contraction. If real GDP declines for two consecutive quarters (with four quarters in a year),
3. Trough. The low point in real GDP, just before it begins to turn up, is called the trough of the business cycle.
4. Recovery. The recovery is the period when real GDP is rising; it begins at the trough and ends at the initial peak. For
example, the recovery in Exhibit 12-7 extends from the trough to where real
GDP is again at Q1.
5. Expansion. The expansion refers to increases in real GDP beyond the recovery. it refers to increases
in real GDP above Q1.
An entire business cycle is measured from
peak to peak.
(i) expansion (increase in production and prices, low interests rates); (ii) crisis (stock exchanges crash and multiple bankruptcies of firms occur); (iii) recession (drops in prices and in output, high interests rates); (iv) recovery (stocks recover because of the fall in prices and incomes). In this model, recovery and prosperity are associated with increases in productivity, consumer confidence, aggregate demand, and prices.
(i) expansion (increase in production and prices, low interests rates); (ii) crisis (stock exchanges crash and multiple bankruptcies of firms occur); (iii) recession (drops in prices and in output, high interests rates); (iv) recovery (stocks recover because of the fall in prices and incomes). In this model, recovery and prosperity are associated with increases in productivity, consumer confidence, aggregate demand, and prices.
ey statistics that indicate the direction of an economy. They are of three main types: (1) Leading indicators (such as new orders for consumer durables, net business formation, and share prices) that attempt to predict the economy's direction, (2) Coincident indicators (such as gross domestic product, employment levels, retail sales) that show up together with the occurrence of associated economic activity, and (3) Lagging indicators (such as gross national product, consumer price index, interest rates) that become apparent only after the occurrence of associated economic activity
Economic indicators can be classified into three categories according to their usual timing in relation to the business cycle: leading indicators, lagging indicators, and coincident indicators.
A leading indicator is one that tends to turn up or down before the general economy does
Leading indicators[edit]
Leading indicators are indicators that usually change before the economy as a whole changes.[1] They are therefore useful as short-term predictors of the economy. Stock market returns are a leading indicator: the stock market usually begins to decline before the economy as a whole declines and usually begins to improve before the general economy begins to recover from a slump. Other leading indicators include the index of consumer expectations, building permits, and the money supply.[citation needed] The Conference Board publishes a composite Leading Economic Index consisting of ten indicators designed to predict activity in the U. S. economy six to nine months in future.
Components of the Conference Board's Leading Economic Indicators Index
Average weekly hours (manufacturing) — Adjustments to the working hours of existing employees are usually made in advance of new hires or layoffs, which is why the measure of average weekly hours is a leading indicator for changes in unemployment.
Average weekly jobless claims for unemployment insurance — The CB reverses the value of this component from positive to negative because a positive reading indicates a loss in jobs. The initial jobless-claims data is more sensitive to business conditions than other measures of unemployment, and as such leads the monthly unemployment data released by the U.S. Department of Labor.
Manufacturers' new orders for consumer goods/materials — This component is considered a leading indicator because increases in new orders for consumer goods and materials usually mean positive changes in actual production. The new orders decrease inventory and contribute to unfilled orders, a precursor to future revenue.
Vendor performance (slower deliveries diffusion index) — This component measures the time it takes to deliver orders to industrial companies. Vendor performance leads the business cycle because an increase in delivery time can indicate rising demand for manufacturing supplies. Vendor performance is measured by a monthly survey from the National Association of Purchasing Managers (NAPM). This diffusion index measures one-half of the respondents reporting no change and all respondents reporting slower deliveries.
Manufacturers' new orders for non-defense capital goods — As stated above, new orders lead the business cycle because increases in orders usually mean positive changes in actual production and perhaps rising demand. This measure is the producer's counterpart of new orders for consumer goods/materials component (#3).
Building permits for new private housing units.
The Standard & Poor's 500 stock index — The S&P 500 is considered a leading indicator because changes in stock prices reflect investor's expectations for the future of the economy and interest rates.
Money Supply (M2) — The money supply measures demand deposits, traveler's checks, savings deposits, currency, money market accounts, and small-denomination time deposits. Here, M2 is adjusted for inflation by means of the deflator published by the federal government in the GDP report. Bank lending, a factor contributing to account deposits, usually declines when inflation increases faster than the money supply, which can make economic expansion more difficult. Thus, an increase in demand deposits will indicate expectations that inflation will rise, resulting in a decrease in bank lending and an increase in savings.
Interest rate spread (10-year Treasury vs. Federal Funds target) — The interest rate spread is often referred to as the yield curve and implies the expected direction of short-, medium- and long-term interest rates. Changes in the yield curve have been the most accurate predictors of downturns in the economic cycle. This is particularly true when the curve becomes inverted, that is, when the longer-term returns are expected to be less than the short rates.
Index of consumer expectations — This is the only component of the leading indicators that is based solely on expectations. This component leads the business cycle because consumer expectations can indicate future consumer spending or tightening. The data for this component comes from the University of Michigan's Survey Research Center, and is released once a month.
Coincident indicators change at approximately the same time as the whole economy, thereby providing information about the current state of the economy. There are many coincident economic indicators, such as Gross Domestic Product, industrial production, personal income and retail sales. A coincident index may be used to identify, after the fact, the dates of peaks and troughs in the business cycle.[2]
There are four economic statistics comprising the Index of Coincident Economic Indicators:[citation needed]
Number of employees on non-agricultural payrolls
Personal income less transfer payments
Industrial production
Manufacturing and trade sale
The Philadelphia Federal Reserve produces state-level coincident indexes based on 4 state-level variables:[3]
Nonfarm payroll employment
Average hours worked in manufacturing
Unemployment rate
Wage and salary disbursements deflated by the consumer price index (U.S. city average)
Lagging indicators are indicators that usually change after the economy as a whole does. Typically the lag is a few quarters of a year. The unemployment rate is a lagging indicator: employment tends to increase two or three quarters after an upturn in the general economy[citation needed]. In
Lagging indicators[edit]
Lagging indicators are indicators that usually change after the economy as a whole does. Typically the lag is a few quarters of a year. The unemployment rate is a lagging indicator: employment tends to increase two or three quarters after an upturn in the general economy[citation needed]. In finance, Bollinger bands are one of various lagging indicators in frequent use. In a performance measuring system, profit earned by a business is a lagging indicator as it reflects a historical performance; similarly, improved customer satisfaction is the result of initiatives taken in the past.[citation needed]
The Index of Lagging Indicators is published monthly by The Conference Board, a non-governmental organization, which determines the value of the index from seven components.
The Index tends to follow changes in the overall economy.
The components on the Conference Board's index are:
The average duration of unemployment (inverted)
The value of outstanding commercial and industrial loans
The change in the Consumer Price Index for services
The change in labour cost per unit of output
The ratio of manufacturing and trade inventories to sales
The ratio of consumer credit outstanding to personal income
The average prime rate charged by banks
firms hold to facilitate their operations. The national accounts count this investment
spending—spending on new productive physical capital, such as machinery and buildings,
and on changes in inventories—as part of total spending on goods and services.
You might ask why changes in inventories are included in investment spending—
finished cars aren’t, after all, used to produce more cars. Changes in inventories of finished
goods are counted as investment spending because, like machinery, they change
the ability of a firm to make future sales. So spending on additions to inventories is a
form of investment spending by a firm. Conversely, a drawing -down of inventories is
counted as a fall in investment spending because it leads to lower future sales. It’s also
important to understand that investment spending includes spending on the construction
of any structure, regardless of whether it is an assembly plant or a new
house. Why include the construction of homes? Because, like a plant, a new house
produces a future stream of output—housing services for its occupants.
Suppose we add up consumer spending on goods and services, investment spending,
government purchases of goods and services, and the value of exports, then subtract
the value of imports. This gives us a measure of the overall market value of the
goods and services the economy produces. That measure has a name: it’s a country’s
gross domestic product. But before we can formally define gross domestic product, or
GDP, we have to examine an important distinction between classes of goods and services:
the difference between final goods and services versus intermediate goods and services.
Secondary sector of the economy
Economic sectors Three-sector hypothesis Primary sector: raw materialsSecondary sector: manufacturingTertiary sector: services Theorists Colin Clark · Jean Fourastié Additional sectors Quaternary sector · Quinary sector Sectors by ownership Business sector · Private sector · Public sector · Voluntary sector The secondary sector of the economy or industrial sector includes those economic sectors that create a finished, tangible product: production and construction.
Contents
[hide]
1 Function
2 List of countries by Industrial output
3 See also
4 References
Function
This sector generally takes the output of the primary sector and manufactures finished goods. These products are then either exported or sold to domestic consumers and to places where they are suitable for use by other businesses. This sector is often divided into light industry and heavy industry. Many of these industries consume large quantities of energy and require factories and machinery to convert the raw materials into goods and products. They also produce waste materials and waste heat that may pose environmental problems or cause pollution.
. . . .
Some economists contrast wealth-producing sectors in an economy such as manufacturing with the service sector which tends to be wealth-consuming.[1] Examples of service may include retail, insurance, and government. These economists contend that an economy begins to decline as its wealth-producing sector shrinks.[2] Manufacturing is an important activity to promote economic growth and development. Nations that export manufactured products tend to generate higher marginal GDP growth, which supports higher incomes and marginal tax revenue needed to fund the quality-of-life initiatives such as health care and infrastructure in the economy. The field is an important source for engineering job opportunities. Among developed countries, it is an important source of well-paying jobs for the middle class to facilitate greater social mobility for successive generations of the economy.
List of countries by Industrial output
Main article: List of countries by GDP sector composition
Below is a list of countries by industrial output in 2010. Output is in millions of US$.
Rank Country Output in nominal GDP — World 19,313,147 — European Union 4,070,558 1 United States 3,239,374 2 China 2,756,903 3 Japan 1,359,259 4 Germany 921,749 5 Brazil 560,204 6 Russia 539,149 7 Italy 519,944 8 United Kingdom 489,945 9 France 477,767 10 Canada 413,975 Rank Country Output in PPP GDP — World 22,799,316 1 China 4,730,197 — European Union 3,792,605 2 United States 3,239,374 3 Japan 1,073,073 4 India 1,067,883 5 Russia 818,048 6 Germany 817,441 7 Brazil 582,112 8 South Korea 573,484 9 Mexico 510,995 10 Indonesia 484,045 See also
Manufacturing
Three-sector hypothesis
Industrial policy
De-industrialization crisis
Industry information
References
^ David Friedman, New America Foundation (2002-06-16).No Light at the End of the Tunnel Los Angeles Times.
^ Sir Keith Joseph, Center for Policy Studies (1976-04-05).Stockton Lecture, Monetarism Is Not Enough, with forward by Margaret Thatcher. (Barry Rose Pub.) Margaret Thatcher Foundation (2006).
Tertiary sector of the economy
Economic sectors Three-sector hypothesis Primary sector: raw materialsSecondary sector: manufacturingTertiary sector: services Theorists Colin Clark · Jean Fourastié Additional sectors Quaternary sector · Quinary sector Sectors by ownership Business sector · Private sector · Public sector · Voluntary sector The tertiary sector of the economy (also known as the service sector or the service industry) is one of the three economic sectors, the others being the secondary sector (approximately the same as manufacturing) and the primary sector (agriculture, fishing, and extraction such as mining).
The service sector consists of the "soft" parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability. The basic characteristic of this sector is the production of services instead of end products. Services (also known as "intangible goods") include attention, advice, experience, and discussion. The production of information is generally also regarded as a service, but some economists now attribute it to a fourth sector, the quaternary sector.
The tertiary sector of industry involves the provision of services to other businesses as well as final consumers. Services may involve the transport, distribution and sale of goods from producer to a consumer, as may happen in wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment. The goods may be transformed in the process of providing the service, as happens in the restaurant industry. However, the focus is on people interacting with people and serving the customer rather than transforming physical goods.
For the last 30 years, there has been a substantial shift from the primary and secondary sectors to the tertiary sector in industrialised countries. This shift is called tertiarisation.[1] The tertiary sector is now the largest sector of the economy in the Western world, and is also the fastest-growing sector.
Contents
[hide]
1 Examples
2 Difficulty of definition
3 Theory of progression
4 Issues for service providers
5 List of countries by service output
6 References
Examples
Examples of service sector employment include:
Government
Healthcare/hospitals
Public health
Waste disposal
Education
Banking
Insurance
Financial services
Legal services
Consulting
News medias, casinos
Tourism
Retail sales
Franchising
Real estate
Sales
Difficulty of definition
It is sometimes hard to define whether a given company is part of the secondary or tertiary sector.
For example, public utilities are often considered part of the tertiary sector as they provide services to people, while creating the utility's infrastructure is often considered part of the secondary sector, even though the same business may be involved in both aspects of the operation.
In order to classify a business as a service, it is necessary to use classification systems such as the United Nations's International Standard Industrial Classification standard, the United States' Standard Industrial Classification (SIC) code system and its new replacement, the North American Industrial Classification System (NAICS), and similar systems in the EU and elsewhere. These governmental classification systems have a first-level hierarchy that reflects whether the economic goods are tangible or intangible.
For purposes of finance and market research, market-based classification systems such as the Global Industry Classification Standard and the Industry Classification Benchmark are used to classify businesses that participate in the service sector. Unlike governmental classification systems, the first level of market-based classification systems divides the economy into functionally related markets or industries. The second or third level of these hierarchies then reflects whether goods or services are produced.
Theory of progression
Economies tend to follow a developmental progression that takes them from a heavy reliance on agriculture and mining, toward the development of manufacturing (e.g. automobiles, textiles, shipbuilding, steel) and finally toward a more service-based structure. The first economy to follow this path in the modern world was the United Kingdom. The speed at which other economies have made the transition to service-based (or "post-industrial") economies has increased over time.
Historically, manufacturing tended to be more open to international trade and competition than services. However, with dramatic cost reduction and speed and reliability improvements in the transportation of people and the communication of information, the service sector now includes some of the most intensive international competition, despite residual protectionism.
Issues for service providers
Service providers face obstacles selling services that goods-sellers rarely face. Services are not tangible, making it difficult for potential customers to understand what they will receive and what value it will hold for them. Indeed some, such as consultants and providers of investment services, offer no guarantees of the value for price paid.
Since the quality of most services depends largely on the quality of the individuals providing the services, it is true that "people costs" are a high component of service costs. Whereas a manufacturer may use technology, simplification, and other techniques to lower the cost of goods sold, the service provider often faces an unrelenting pattern of increasing costs.
Differentiation is often difficult. For example, how does one choose one investment adviser over another, since they often seem to provide identical services? Charging a premium for services is usually an option only for the most established firms, who charge extra based upon brand recognition.
List of countries by service output
Main article: List of countries by GDP sector composition
Bellow is a list of countries by service output in 2010.
Service output in 2010 (Nominal) Rank Country Output in billions of US$ — World 39,758.661 — European Union 11,902.310 1 United States 11,156.390 2 Japan 4,028.648 3 China 2,527.651 4 Germany 2,364.053 5 France 2,053.109 6 United Kingdom 1,741.778 7 Italy 1,496.123 8 Brazil 1,408.872 9 Canada 1,125.446 10 Spain 996.832 11 India 900.847 12 Russia 874.577 13 Australia 872.341 14 Mexico 659.842 15 South Korea 586.123 16 Netherlands 567.887 17 Turkey 473.302 18 Switzerland 372.402 19 Belgium 360.433 20 Sweden 326.387 Service output in 2010 (PPP) Rank Country Output in billions of US$ — World 47,232.459 1 United States 11,156.390 — European Union 11,089.576 2 China 4,336.854 3 Japan 3,180.435 4 India 2,241.336 5 Germany 2,096.529 6 France 1,697.278 7 United Kingdom 1,690.628 8 Brazil 1,463.967 9 Russia 1,313.768 10 Italy 1,291.142 11 Mexico 995.343 12 Spain 967.630 13 Canada 951.144 14 South Korea 849.281 15 Australia 623.830 16 Turkey 612.806 17 Taiwan 554.702 18 Netherlands 490.749 19 Poland 458.038 20 Indonesia 387.236 References
^ Definition by the European Foundation for the Improvement of Living and Working Conditions
The national government budget for 2012 has set the following budget allocations: Noticeably enough, the Department of Science & Technology not reflected in the chart below which underlines the Philippine government's need to invest more on education, particularly in the sciences and engineering fields to solidify its current growth momentum.
As prescribed by the New Central Bank Act, the main functions of the Bangko Sentral are:
Introduction: In Pursuit of Inclusive Growth
Viewed by majority of Filipinos, the record of economic and social progress up to now has proved unsatisfactory for three reasons: first, its pace has been slow when measured against the achievements of the country’s neighbors; second, the benefits of that progress have not been broadly shared; and third, issues of massive corruption and of questioned political legitimacy have undermined the people’s sense of ownership of and control over public policy. Growth has not only lagged, it has failed to benefit the majority, who feel increasingly alienated because their political institutions provide little relief and have drifted beyond their control. Growth, in short, has failed to be inclusive.
Inclusive growth means, first of all, growth that is rapid enough to matter, given the country’s large population, geographical differences, and social complexity. It is sustained growth that creates jobs, draws the majority into the economic and social mainstream, and continuously reduces mass poverty. This is an ideal which the country has perennially fallen short of, and this failure has had the most far-reaching consequences, from mass misery and marginalization, to an overseas exodus of skill and talent, to political disaffection and alienation, leading finally to threats to the constitution of the state itself.
Macroeconomic Policy
Growing output and employment are the preconditions for progress in almost all social and economic aspects of development. Productive employment and rising incomes for the vast majority over a long period can do more to combat poverty decisively than any direct assistance government can ever provide.
It is private actors – from the smallest self-employed entrepreneurs to the largest conglomerates – that create productive jobs and incomes. Government’s responsibility however – through fiscal and monetary policies – is to create an environment for vigorous economic activity, as well as to ensure that enough gains from growth are set aside for larger social purposes or channelled into social investments that facilitate future growth. These objectives are achieved by government decisions regarding the size and direction of public spending and taxation (fiscal policy) and by decisions regarding the control of the nation’s money supply (monetary policy).
Competitive Industry and Services Sectors
Several measures of competitiveness reveal fundamental weaknesses in major development aspects compared to the rest of the world. Compared with its neighbors, the country’s economic performance in terms of investments, exports and competitiveness is unsatisfactory and need to be reversed. The Philippine economy over the past years has been characterized by a reduced share of manufacturing sector in the country’s gross domestic product (GDP) and declining gross domestic investment rate.
Enabling the industry and services sectors to contribute significantly to economic growth and employment requires addressing a number of constraints to their development. Strategies shall therefore be pursued to help raise the competitiveness of industries by improving the business environment; raising productivity and efficiency and inculcating quality consciousness among manufacturers and producers to offer quality goods and services comparable with global brands.
Business competitiveness will be enhanced by improving governance, strengthening economic zones, and strengthening national brand identity/awareness. To increase productivity and efficiency, government shall focus interventions on key priority areas, provide firm level support to MSMEs, increase market access, expand industry cluster development and intensify the culture of competitiveness. Proactive measures to empower consumers, promote competition and enforce trade regulations shall also be pursued.
Competitive and Sustainable Agriculture and Fisheries Sector
The agriculture and fisheries sector provides food and vital raw materials for the rest of the economy. It is itself a significant market for the products and services of the non-agricultural economy. As the sector grows and modernizes, it releases surplus labor to the industry and services sectors. Rising productivity and efficiency in the sector are critical in maintaining the affordability of food and purchasing power, especially among the poor. The sector’s development is therefore vital in achieving inclusive growth and poverty reduction as well as attaining the targets under the MDGs.
The country, however, exhibits a slower structural transformation than other East Asian countries. The shares of agriculture in GDP and total employment have continued to decline, but the transfer of the labor released from this sector to higher-productivity jobs in industry and services has lagged owing to low skill levels among agricultural workers and distortions in other economic sectors.
Increasing demands on the sector’s output have also put pressure on its natural resource base. Unsustainable practices employed to improve yields have resulted in land degradation and problems of water availability. Climate change has exarcebated the inherent vulnerabilities of the sector. Development efforts need to focus on transforming the sector into one that is not only highly productive but also climate-resilient, environment-friendly, and sustainable.
Accelerating Infrastructure Development
The Plan’s infrastructure development program aims to contribute to inclusive growth and poverty reduction. It will support the performance of the country’s economic sectors and ensure equitable access to infrastructure services, especially as these affect the people’s health, education, and housing. Toward these ends, the government will accelerate the provision of safe, efficient, reliable, cost–effective, and sustainable infrastructure.
Towards a Dynamic and Resilient Financial Sector
The financial sector intermediates claims between savings and investors. The credibility and stability of financial institutions and the relative attractiveness of various financial instruments to borrowers and lenders alike determine how much saving will mobilized, how much it stays in the country to be invested, and how this is to be allocated among the various firms and industries. Together with the state of confidence and long-term expectation, therefore, the stability and performance of financial institutions such as banks, equity and bonds markets, insurance companies, and other financial entities have an indirect but vital bearing on investment and the growth of output and employment in the country.
Good Governance and the Rule of Law
Good governance sets the normative standards of development. It fosters participation, ensures transparency, demands accountability, promotes efficiency, and upholds the rule of law in economic, political and administrative institutions and processes. It is a hallmark of political maturity but also a requisite for growth and poverty reduction, for there are irreducible minimum levels of governance needed for large-scale investment to occur and for social programs to be supported.
A cornerstone of good governance is adherence to the rule of law, that is, the impersonal and impartial application of stable and predictable laws, statutes, rules, and regulations, without regard for social status or political considerations.
This chapter assesses the quality of governance in the country and identifies key governance challenges that constrain development. It then lays down corresponding strategies to achieve good governance anchored on the rule of law, and provide an enabling environment for national development.
Social Development
Social development has improved the access of Filipinos to quality basic social service delivery in education, training and culture; health and nutrition; population and development; housing; social protection; and asset reform. The country is on track in pursuing the Millennium Development Goals (MDGs) on poverty, gender and equality, child health, disease control and sanitation. However, the country lags in achieving universal primary education, improving maternal health, and combating HIV/AIDS. Moreover, large discrepancies across regions need to be addressed by the social development sector in the next six years.
The social development sector shall focus on ensuring an enabling policy environment for inclusive growth, poverty reduction, convergence of service delivery, maximized synergies and active multistakeholder participation. Priority strategies include: (a) attaining the MDGs; (b) providing direct conditional cash transfers (CCT) to the poor; (c) achieving universal coverage in health and basic education; (d) adopting the community-driven development (CDD) approach; (e) converging social protection programs for priority beneficiaries and target areas; (f) accelerating asset reform; (g) mainstreaming climate change adaptation and disaster risk reduction in social development; (h) mainstreaming gender and development; (i) strengthening civil society-basic sector participation and public-private partnership; (j) adopting volunteerism; and (k) developing and enhancing competence of the bureaucracy and institutions.
Peace and Security Sector
Peace and security shall be achieved in support to national development. The government shall exert all efforts to win peace and ensure national security. The peace process shall center on the pursuit of negotiated political settlement of all armed conflicts and the implementation of complementary development tracks to address its causes. This shall be anchored on conflict prevention and peace-building in conflict-affected areas. On the other hand, national security shall involve the whole-of-nation approach, focusing on internal stability, upholding the sovereignty and territorial integrity of the state, capability and preparedness against natural calamities and disasters, and reform and modernization of the security sector.
Conservation, Protection and Rehabilitation of the Environment and Natural Resources Towards Sustainable Development
The country is widely acknowledged as having an outstanding endowment of natural resources, which could provide essential ecosystem services to the population. Demands arising from development and utilization activities, population expansion, poor environmental protection, and external factors such as climate change, however, have placed the country’s environment and natural resources under grave threat. For the medium-term, an environment that is healthy, ecologically balanced, sustainably productive, climate change resilient, and one that provides for present and future generations of Filipinos is envisioned. This vision will be pursued through an integrated and community-based ecosystems approach to environment and natural resources management, precautionary approach to environment and natural resources, sound environmental impact assessment (EIA) and cost-benefit analysis (CBA). These, then, are all anchored on the principles of shared responsibility, good governance, participation, social and environmental justice, intergenerational space and gender equity, with people at the core of conservation, protection and rehabilitation, and developmental initiatives.