Wires are hot with news of the economy’s stunning performance in the first quarter. It’s like Arroyo got her Christmas gift early. At 6.9 percent, this is the country’s biggest year-on-year quarterly growth in the last 17 years. Only Vietnam with 7.7 percent and China with its 11.1 percent GDP had higher growth than the Philippines for the period.
Here’s the technical definition of GDP from Investopedia.com: The monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
For those who don’t care about the technical definition, just put a peso sign on every finished product and every service sold within the country for a certain period. Growth from quarter to quarter, year to year is the GDP growth rate. That’s about as simple as I can get. Economists use the GDP figure to measure economic growth.
GNP, or gross national product, is GDP plus net factor income from abroad, or the money earned by Filipinos’ investments overseas. To be fair of course, government number crunchers have to deduct from this amount the income earned here by foreigners.
Look at how the country grew this much — consumption and expansion in back-office services. Much of this growth was reached thanks to you — Filipinos working abroad at such a high cost to you and your family. Your money made a truckload of multiplier effects. Consumption accounted for 70 percent of GDP.
The gross national accounts capture benefits from remittance money as they are transferred here, as they are placed in savings and investment instruments, as they are used by your family to buy things they need to live, as they are used by your beneficiaries here to set up businesses. Your efforts not only bring in the cash, but also keep a lot of local companies afloat.
You might be curious what your money bought. Based on figures from the National Statistical Coordination Board (NSCB), your money was spent on: food, clothing and footwear, tobacco, fuel, light, and water. These are the items that showed fast increase in growth. Hmm…I wonder what ‘tobacco’ is doing in that list.
The items transportation and communication, household operations, and beverage all exhibited lower growth, so money was still being spent on these items, just not as much as before. Household furnishings however, suffered cutbacks.
Having said that, its also not accurate to say that the rest of the economy contributed nothing to growth. Moderate recovery in farming output and sustained export growth gave the economy a pick-me-upper. Government’s spending grew 13.3 percent.
One thing about GDP: what about the underground economy? There are a lot of economic activities that do not get formally reported and recognized in the maze of government statistics. So when the NSCB says the economy grew by 6.9 percent, just imagine what the actual growth really is.
Other news items of interest to personal finance enthusiasts:
ING and PNB have reached an agreement to create a mutual fund for OFWs. Aboitiz Power, which recently gained approval to do an IPO at P6 per share from July 4 to 10, said it was talking with two banks to finance two new hydropower plant projects in Davao. Central bank just this afternoon decided to keep rates steady. No surprise there. That means more money will stay in the system for new businesses and stock market investments. Shares closed sharply higher today due to the high GDP growth rate.
Bad news for those who are trying to dodge the taxman. The Finance department is limiting the coverage of the Tax Amnesty Law coverage to those who have not yet been charged by the Bureau of Internal Revenue. Good news for the rest of us who should be benefiting from taxes.
Interesting times, eh? Interesting times make a lot of interesting people rake in a lot of money.
May 30th, 2008 at 8:47 am
[...] fact, while GDP is the most popular thermometer for economic growth as I wrote in a previous post, it doesn’t bother most hard-nosed businessmen who have lived through wars to tell their tales. [...]
August 30th, 2007 at 2:57 pm
Economy is an a roll…the second time around! woohoo (ala homer) 7.5% GDP, 8.3% GNP. How’s that? Q1 was also revised, upward! I was expecting they will revise the Q1 data downward to near 6.7. but surprise surprise! (supplies if you’re chinese). the economy actually grew by 7.1% last quarter. Now, for the Q3 I don’t expect much growth. Nothing’s happening during the Q3, and also the dry spell will take its toll on Q3, but I expect agri to bounce back on Q4. It’s time to go bargain hunting on stocks! is it still down due to subprime jitters? tsk tsk. now investors will realize fundamentals is still better than investors’ EQ.
June 7th, 2007 at 9:56 am
@hachiko
of course it’s illegal! It was on the news early this year. they didn’t melt the coin though. it’s costly! think of the amount of heat you will need to melt the coins. they actually pound it to thin sheets, then export it. Of course they were caught. I think the BSP cannot easily change the component of the coin because the quality will suffer, and also it will be prone to counterfeit. remember the fake 5 and 10 peso coins victimizing commuters?
June 6th, 2007 at 3:52 pm
hi, there’s a quicker way to quintiple your money! Take 300,000 one-peso coins, melt them down and sell the copper and nickel. Each peso coin now has P 5 in metal since metal prices are also on a roll!
hehehe. But now don’t ask me whether it’s legal 
But then again BSP is really nuts not using a cheaper alloy for our coins.
June 5th, 2007 at 9:13 pm
wow…i hope my mutual funds will go all the way like hachiko’s. way to go dude!