Last November 9, the Philippines Statistics Authority (PSA) officially released the country’s 2021 3rd quarter Gross Domestic Product (GDP) report. The economy grew by 7.1% from July to September, which is greater than last year’s 3rd quarter GDP of -11.6%. It exceeded the forecasted figures made by various institutions and groups such as Asia and the Pacific, Asia Institute of Management, and Union Bank of the Philippines Inc.
The Philippines is one of the countries in Southeast Asia that shows substantial growth despite COVID-19 challenges, according to the Philippines News Agency (PNA). Compared to the previous quarter, a growth rate of 7.1% is less than the 12% rate measured last 2nd quarter. This was primarily due to stricter policies implemented by the government to combat the Delta variant surge.
The Gross Domestic Product or GDP is one of the most important indicators in measuring the performance of a country's economy. It is the monetary value of all produced final goods and services within a country in a given particular period of time. It shows economic outputs created inside a country for a specific period.
A higher GDP means a greater amount of goods and services were made within that country and that time period. It can be calculated annually or quarterly. In the case of the Philippines, both are being practiced. Also, there are 3 approaches in measuring GDP. These are Income, Expenditure and Output approaches.
𝐈𝐧𝐜𝐨𝐦𝐞 𝐀𝐩𝐩𝐫𝐨𝐚𝐜𝐡
From the word itself, Income approach deals with the income earned from factors of production. Wage, rent, interest and profit, or also called National Income, are added together with statistical discrepancy and consumption on fixed capital less net primary income to derive GDP. Net Primary Income from the rest of the world this 3rd quarter was reduced by 52.3% whereas Gross National Income grew at 2.8%.
𝐄𝐱𝐩𝐞𝐧𝐝𝐢𝐭𝐮𝐫𝐞 𝐀𝐩𝐩𝐫𝐨𝐚𝐜𝐡
On the other hand, the expenditure approach estimates spending made by the different sectors in the economy. It is often illustrated using the formula, C+I+G+Nx. C stands for the consumption made by the household, I for investment from the private sector, G for government expenditure and lastly, Nx equals export minus import. From the data released by PSA, household consumption’s contribution to GDP amounted to 7.1% while Gross Capital Formation was 22%. Government’s expenditure shares from the total GDP was 13.6% while export was recorded at 9% and import at 13.2%.
𝐎𝐮𝐭𝐩𝐮𝐭 𝐀𝐩𝐩𝐫𝐨𝐚𝐜𝐡
Output, also called Product or Value-added approach, calculates the total output produced within a country after subtracting the costs incurred in producing intermediate goods. Intermediate goods are different from final goods that GDP accounted for. The first one is used for further production, whereas the latter is ready for consumption. Furthermore, major economic sectors like service, show a positive growth with 8.2% followed by the industry sector with 7.9%. These were mainly influenced by wholesale and retail trade, repair of vehicles and motorcycles and other service-related businesses. On the down side, agriculture, forestry and fishery contracted to 1.7% for this quarter.
COVID-19 does not only affect people’s health. According to a report made by the United Nations Conference on Trade and Development (UNCTAD) last June 30, the global economy may lose more than $4 trillion dollars from 2020 to 2021. This is mainly due to losses experienced by the tourism sector as movements of people from one place to another are being restricted to control the spread of the virus.
Likewise, developing countries tend to suffer great losses compared to the others because vaccine roll-out is uneven across nations. It is therefore important for countries to come up with effective recovery plans that will pump their economy back to usual.
In the Philippines, Socioeconomic Planning Secretary Karl Kendrick Chua said that the keys to improve the economic condition of the country are acceleration of vaccination programs, maximization of budget and reopening the economy. According to the Department of Health (DOH), there were a total of 70, 294, 534 doses administered as of November 15.
Meanwhile, various groups and institutions have raised their GDP growth forecasts for the last quarter. From the initial 3% growth rate forecast, Goldman Sachs Economics Research saw that it will improve to 4.9% for this year while Pantheon Macroeconomics projected 5.5% GDP rate. This is greater than the growth target of 4-5% set by the government.
On the other hand, Asian Development Bank’s (ADB) forecast shows a 5.5% GDP growth rate whereas inflation will be at 3.5% for the year 2022. It also shows that by the end of 2022, the Philippines' economy may recover to the pre-pandemic level.
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Written by: Karen Mamplata
Layout and Design by: Ian Ramos
Sources:
Camba, A. L., Maniego, N. L., Ronan, J. R., & Payumo, C. S. (2014). Understanding Economics. Manila: ALTEO Digital & Printers Inc.
McConnell, C. R., Brue, S. L., & Flynn, S. M. (n.d.). Economics Global Edition. Philippines: C&E Publishing Inc.
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