Economic Growth

and
Development
 ECONOMIC GROWTH AND DEVELOPMENT

"The strongest principle of growth lies in the human choice ". -Lord Kelvin (1883)

"Never discourage anyone who continually makes progress, no matter how slow."-Plato

One thing Filipinos have long been yearning for is economic development. Attaining it is
a constitutional mandate that the Philippine government must fulfill. Thus, different
administrations drew up blueprints to attain it. President Ramos called it the Philippines
2000". President Estrada termed it "Angat Pinoy 2004"; and President Arroyo wanted a
"Strong Public". President Benigno S. Aquino III laid out the "Daang Matuwid".

Unfortunately, not all succeeded because of:
mismanagement
graft
corruption
lack of funds

This explains why the Philippine economy has hardly developed.
 THE THREE FUNDAMENTAL ECONOMIC GOALS

There are many economic goals the Philippines wishes to attain. Full employment, increase in
productivity and economic equity are the basic ones. These are closely interrelated and the
cornerstone of economic growth and development.

Full employment- jobs for all the members of the labor force
-an ideal situation

Frictional unemployment- common among developed economies
-exists if the country's employment rate is at least 95%

Fuller employment is still attainable, provided the economy harnesses the potentials of its
resources to the fullest.

Full employment increases economic productivity. More people at work means more goods and
services produced. Productivity increases the volume of output at minimal production cost.
The profitable outlook of the market attracts entrepreneurs to put up more businesses. The
influx of investments creates multiple economic opportunities for the people. If investments
remain profitable, and businesses share there profits with workers through attractive salaries
and fringe benefits; economic equity.
 THE MEANING OF ECONOMIC GROWTH

Economic growth- the increase in the society's productive
capacity
-when productivity rate > population growth rate

Economic stagnation- economy growth=population growth

If population grows faster than the economy, per capita GNP, and
per capita income will decline. This situation is called Economic
retrogression- exact opposite of economic growth.
 THE SIGNIFICANCE OF ECONOMIC GROWTH

Economic growth means improved standard of living and quality of life.

To businesses, economic growth means more opportunities for investment
and profit. A growing economy demands for more goods and services.

Economic growth signifies more incomes for the government. Tax revenues
rises as incomes and consumption of individuals and businesses increase.
The government uses the revenues to deliver public goods and services.
Which means:

>more well-paved roads and bridges
> better education and healthcare
>efficient bureaucracy
Positive attitude toward work sustains economic growth and hastens
economic development.
 FACTORS AFFECTING ECONOMIC GROWTH AND DEVELOPMENT

>Economic factors:
Land-is the principal source of raw materials for production
Labor- labor productivity is the rate of increase in output per unit of labor
used in production
- a country must have a productive labor force
- Underemployment rate has stayed close to 20% during the last eight years
- Migration of skilled workers could result a brain drain phenomenon and will
delay the country's development.
Capital- country's capital stock is an important factor
- it increases as investments flood into the country
Entrepreneur- innovation is the key to economic growth
- "History of development is the history of innovations" -Joseph A.
Schumpeter, a leading Austrian-American 18th century economist
- government must promote entrepreneurship to hasten economic
development
 >Noneconomic Factors
Scientific Breakthroughs- pave the way for invention of better
technologies
- technology evolves as entrepreneurs use new scientific
breakthroughs to fashion new products.
Peace and Order- enhances business profitability
Political Stability- promotes peace and order and encourages
people's support for the government
- a stable government plays a more active role in the economy
- graft and corruption creates political instability
Culture- some societies hold on to traditional beliefs and
practices
- some restrains innovations and some doesn't
- some hinder economic growth and some don't
Constitution- private individuals and organizations operate in
the Philippine economy within the limits prescribed by the law.
 INDICATORS OF ECONOMIC GROWTH

Changes in the real GNP indicate whether the economy is
growing or not. The real GNP is a fair measure of economic
growth because it is output-driven and not price-driven. An
appreciating real GNP denotes a growing economy.
 ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT DISTINGUISHED

Most people say that Economic growth and Economic development
mean the same. However, to economists they are different.

Economic growth
> a periodic increase in the absolute value of real output
> short-term phenomenon
> monitored and measured on annual basis

Economic development
> economic growth sustained for a long period of time
> the real out put of the economy has grown for years
> transforms not only the economy but the entire society

 ECONOMIC DEVELOPMENT AND NATIONAL DEVELOPMENT DISTINGUISHED

National Development
> growth of all dimensions of the society
> not only limited to economic development
> includes moral, cultural, political, educational, and ecological
developments

Economic Development
> must be real, comprehensive, and far-reaching
> trickles down to all sectors of the society, especially the marginalized
> empowers the people to act on their own problems

As the economy develops, the government should play only a subsidiary
role in the economy. The small units of the society should assume a bigger
role. This development approach follows the principle of subsidiarity.
 THE NATIONAL AND ECONOMIC AND DEVELOPMENT AUTHORITY
(NEDA)

-it's responsibility is planning
-was established during the administration of President Ferdinand
E. Marcos
-was reorganized by President Corazon Aquino in 1987 through
Executive No. 230
-sets forth the country's economic targets
 The NEDA is divided into two separate and distinct entities:
NEDA Board
NEDA Secretariat

The NEDA Board is composed of the:

President of the Republic of the Philippines as the Chairman
NEDA Director-General as the Vice-Chairman
(other members)
Secretaries of the Department of the Finance (DOF)
Department of Trade and Industry (DTI)
Department of Environment and Natural Resources (DENR)
Department of Public Works and Highways (DPWH)
Department if Budget and Management (DBM)
Department of Labor and Employment (DOLE)
Department of Interior and Local Government (DILG)
 The NEDA Board

- its function is to formulate continuing, coordinated, and fully
integrated economic policies, plans, and programs in consultation
with the different sectors of the Philippine Society.

These policies, plans, and programs must:
1. promote and achieve economic growth and social equity;
2. initiate a multifaceted development process;
3. sum up the national and regional targets and strategies;
4. enjoin the different government agencies to coordinate with
the Board on their major socioeconomic policies, plans,
programs, and projects;
5. prioritize the linkage between development planning,
programming, and budgeting.
 The NEDA Secretariat

- serves as the secretariat of the NEDA board
- is the technical and support arm of the NEDA
- takes care of the day-to-day operations of the agency
- is headed by the NEDA Director General
holds a Cabinet rank and functions as the government's Socioeconomic
Planning Secretary
* exercises general supervision and control over the technical and
administrative personnel of the NEDA Secretariat

THE 2011-2016 PHILIPPINE DEVELOPMENT PLAN

- development plan of President Benigno S. Aquino III
- aims to achieve inclusive growth and to reduce poverty
- is a blueprint of what the Aquino administration has envisioned for the
country until 2016
 It is anchored on five major guideposts:
1.) Anti-Corruption, Accountable and Participating Governance
2.) Poverty Reduction and Empowerment of the Poor and
Vulnerable
3.) Rapid, Inclusive, and Sustained Economic Growth
4.) Just and Lasting Peace and the Rule of Law
5.) Integrity of the Environment and Climate Change Mitigation
and Adaptation

 The plan has nine indicators:
1. Macroeconomy
2. Competitive Industry and Services Sectors
3. Competitive and Sustainable
Agriculture and Fisheries Sector
4. Accelerating Infrastructure Development
5. Toward a Dynamic and Resilient Financial System
6. Good Governance and the Rule of Law
7. Social Development
8. Peace and Security
9. Conservation, Protection, Rehabilitation of Environment and
Natural Resources
 The National Economic and Development Authority promotes
people empowerment.
* It uses a consultative approach in planning.
* It is called Indicative Planning- encourages the people to take
active participation in crafting, implementing, monitoring, and
assessing development programs.