Daza, Karla Rose S.

III – AHRM

Micro & Macro Economics

Macroeconomics

Macroeconomics, branch of economics that studies the behavior of a national or

regional economy as a whole. It is concerned with understanding economy-wide
events such as the total amount of goods and services produced, the level
of unemployment, and the general behavior of prices.

It studies how an overall economy—the market systems that operate on a large scale—
behaves. Macroeconomics studies economy-wide phenomena such as inflation, price
levels, rate of economic growth, national income, gross domestic product (GDP), and
changes in unemployment.

Microeconomics

Microeconomics is the social science that studies the implications of human action,
specifically about how those decisions affect the utilization and distribution of scarce
resources. Microeconomics shows how and why different goods have different values,
how individuals make more efficient or more productive decisions, and how
individuals best coordinate and cooperate with one another. Generally speaking,
microeconomics is considered a more complete, advanced, and settled science
than macroeconomics.

It focuses on the actions of individual agents within the economy, like households,
workers, and businesses.

STATUS OF PHILIPPINE ECONOMY UNDER FERDINAND MARCOS

The Philippines economy grew at a relatively high average annual rate of 6.4 percent
during the 1970s, financed in large part by foreign-currency borrowing. External
indebtedness grew from $2.3 billion in 1970 to $24.4 billion in 1983, much of which
was owed to transnational commercial banks. In the 1980s the Philippine economy
was hurt by political instability, authoritarianism, increasing foreign debt, falling
commodity prices, corporate mismanagement and vast unemployment.

The Philippines found itself in an economic crisis in early 1970, in large part the
consequence of the profligate spending of government funds by President Marcos in
his reelection bid. The government, unable to meet payments on its US$2.3 billion
international debt, worked out a US$27.5 million standby credit arrangement with the
International Monetary Fund (IMF) that involved renegotiating the country's external
debt and devaluing the Philippine currency to P6.40 to the United States dollar. The
government, unwilling and unable to take the necessary steps to deal with economic
difficulties on its own, submitted to the external dictates of the IMF. It was a pattern
that would be repeated with increasing frequency in the next twenty years.

In the early 1980s, the economy began to run into difficulty because of the declining
world market for Philippine exports, trouble in borrowing on the international capital
market, and a domestic financial scandal. The problem was compounded by the
excesses of President Ferdinand E. Marcos's regime and the bailing out by
government-owned financial institutions of firms owned by those close to the
president that encountered financial difficulties. In 1983 the country descended into a
political and economic crisis in the aftermath of the assassination of Marcos's chief
rival, former Senator Benigno Aquino, and circumstances had not improved when
Marcos fled the country in February 1986.

STATUS OF PHILIPPINE ECONOMY UNDER CORAZON AQUINO

The Philippines economy floundered under Corazon Aquino. Power shortages and
brownouts were common. The American military bases were closed down. Economic
growth revived in 1986 under Aquino, reaching 6.7 percent in 1988. But in 1988 the
economy once again began to encounter difficulties. The trade deficit and the
government budget deficit were of particular concern. In 1990 the economy continued
to experience difficulties, a situation exacerbated by several natural disasters, and
growth declined to 3 percent. [Source: Library of Congress *]

The Philippine economy experienced considerable difficulty in the 1980s. Real gross
national product (GNP) grew at an annual average of only 1.8 percent, less than the
2.5 percent rate of population increase. The US$668 GNP per capita income in 1990
was below the 1978 level, and approximately 50 percent of the population lived below
the poverty line. The 1988 unemployment rate of 8.3 percent (12.3 percent in urban
areas) peaked at 11.4 percent in early 1989, and the underemployment rate,
particularly acute for poor, less-educated, and elderly people, was approximately
twice that of unemployment. In 1988, about 470,000 Filipinos left the country to work
abroad in contract jobs or as merchant seamen.

In 1990 the Philippines had not yet recovered from the economic and political crisis
of the first half of the 1980s. At P18,419, or US$668, per capita GNP in 1990 remained,
in real terms, below the level of 1978. A major thrust of Aquino's 1986 People Power
Revolution was to address the needs of impoverished Filipinos. One of the four
principles of her "Policy Agenda for People-Powered Development," was promotion
of social justice and poverty alleviation. Government programs launched in 1986 and
1987 to generate employment met with some success, reversing the decline of the first
half of the decade, but these efforts did little to alleviate the more chronic aspects of
Philippine poverty.

After Aquino took office the most immediate task for here economic advisers was to
get the economy moving, and a turn around was achieved in 1986. Economic growth
was low (1.9 percent), but it was positive. For the next two years, growth was more
respectable--5.9 and 6.7 percent, respectively. In 1986 and 1987, consumption led the
growth process, but then investment began to increase. In 1985 industrial capacity
utilization had been as low as 40 percent, but by mid-1988 industries were working at
near full capacity. Investment in durable goods grew almost 30 percent in both 1988
and 1989, reflecting the buoyant atmosphere. The international community was
supportive. Like domestic investment, foreign investment did not respond
immediately after Aquino took office, but in 1987 it began to pick up. The economy
also was helped by foreign aid. The 1989 and 1991 meetings of the aid plan called the
Multilateral Aid Initiative, also known as the Philippine Assistance Plan, a multinational
initiative to provide assistance to the Philippines, pledged a total of US$6.7 billion.

Economic successes, however, generated their own problems. The trade deficit rose
rapidly, as both consumers and investors attempted to regain what had been lost in
the depressed atmosphere of the 1983-85 period. Although debt-service payments on
external debt were declining as a proportion of the country's exports, they remained
above 25 percent. And the government budget deficit ballooned, hitting 5.2 percent
of GNP in 1990.

The 1988 GNP grew 6.7 percent, slightly more than the government plan target.
Growth fell off to 5.7 percent in 1989, then plummeted in 1990 to just over 3 percent.
Many factors contributed to the 1990 decline. The country was subjected to a
prolonged drought, which resulted in the increased need to import rice. In July a
major earthquake hit Northern Luzon, causing extensive destruction, and in
November a typhoon did considerable damage in the Visayas. There were other,
more human, troubles also. The country was attempting to regain a semblance of
order in the aftermath of the December 1989 coup attempt. Brownouts became a daily
occurrence, as the government struggled to overcome the deficient power-
generating capacity in the Luzon grid, a deficiency that in the worst period was below
peak demand by more than 300 megawatts and resulted in outages of four hours and
more. Residents of Manila suffered both from a lack of public transportation and
clogged and overcrowded roadways; garbage removal was woefully inadequate;
and, in general, the city's infrastructure was in decline. Industrial growth fell from 6.9
percent in 1989 to 1.9 percent in 1990; growth investment in 1990 in both fixed capital
and durable equipment declined by half when compared with the previous year.
Government construction, which grew at 10 percent in 1989, declined by 1 percent in
1990.
STATUS OF PHILIPPINE ECONOMY UNDER FIDEL RAMOS

President Fidel Ramos (1992-1998) was given high marks for handling the economy.
By breaking apart monopolies, liberalizing foreign investment laws and privatizing
business and industries by controlled powerful families, Ramos was crediting with
transforming the Philippines from a country with a history of poverty, corruption,
rebellion, foreign ineptness and tax evasion into an economic powerhouse that was
not yet an Asian tiger but was sometimes referred to as Asian tiger cub.

Oliver Teves of Associated Press wrote: “For a brief period of the 1990s, the
Philippines under the presidency of Fidel Ramos registered high growth rates and
was touted as the next Asian "tiger" economy. But the ingrained poverty, corruption
and crime rate, and the abiding threat of another popular uprising conspire to scare
away investors and drain the country of its best brains and hardest workers. [Source:
Jim Gomez and Oliver Teves Associated Press, February 25, 2006 +^+]

The Philippine economy showed some improvement in early 1992, spurred by

increases in agricultural production and in consumer and government spending.
Budget deficits were well within IMF guidelines--P3.2 billion in the first two months.
At the end of April, the treasury posted a P5.5 billion surpluses as a result of higher
than programmed revenue receipts, mainly from the sale of Philippine Airlines. The
increased revenue permitted the early repeal of the 5 percent import surcharge,
stimulating both import spending and export growth. The money supply grew more
rapidly than desired, but was kept under control. Treasury bill rates fell to 17.3
percent in March 1992 from 23 percent in November 1991, and inflation was down to
9.4 percent for the first quarter of 1992, from 18.7 percent in 1991.

One of the greatest threats to the Philippine economy in 1992 was the power shortage.
The fall in the water level in Lake Lanao caused a 50 percent reduction in the power
supply to Mindanao in December 1991, and the resumption of full power was not
expected until almost the end of 1992. The power shortage in Luzon continued to be
chronic. Power cuts of four to five hours per day have been common; in May they
reached six hours on some days in Manila, the country's industrial hub. To help to
meet this chronic shortage, the government reactivated the contract with
Westinghouse Corporation to restart construction on a 620-megawatt nuclear power
plant on the Bataan Peninsula that had been abandoned in 1986. This plant however
was not scheduled to go on line until 1995.

To get the Philippines economy going, Ramos and the Philippine Congress abolished
tariffs and preferential terms that enriched the rich families. He reformed the banking
system and drove down interest rates. He overhauled the electricity infrastructure so
that energy shortages and brown outs became a thing of the past.

The growth rate during the Ramos years was a robust 5 percent a year and inflation
was in the single digits, down from 25 percent in 1990. Under his leadership, fiber
optic lines were installed, property values soared, five-star hotels and condominiums
were built, the stock market showed big gains, overseas workers began returning
home and the former American military bases at Subic and Clark became thriving
trade and industrial centers.

Foreign investment increased. Companies like Acer (a Taiwanese company) and

Intel moved into the Philippines Much of the prosperity was linked to investments from
Hong Kong by tycoons like Gordon Wu, who shipped their money to Manila before
the reunification with China. In the early 1990s, the Philippines was regarded as an
economic rival of Thailand and Malaysia now it lags far behind them.

STATUS OF PHILIPPINE ECONOMY UNDER JOSEPH ESTRADA

There was a sense of optimism when Joseph Estrada was elected. Investors shared
this sense of hope and initially poured money into the Philippines but it didn’t take
long for this optimism to evaporate. Foreign investors were turned off by cronyism,
scandals and favoritism towards Philippines companies.

Estrada moved to tighten securities regulations, liberalize the trade of grains and
privatize the electricity industry. His effort to change laws limiting foreign ownership
of businesses to 40 percent was halted by his impeachment trial.
In the end Estrada proved to be a friend of big business. He revived the culture of
corruption and was plagued by charges of cronyism. This was on top of inconsistent
monetary policy, slow economic growth, and uncertainty brought about by terrorists
and insurgencies. He said he was a friend of the poor yet he failed to launch one
meaningful anti-poverty program. Most of his efforts consisted of parading around
with movie stars that were reminiscent of what Imelda Marcos did. There also wasn’t
much of an effort to pave roads, set up irrigations projects or build school or collect
taxes to pay for them.

As Estrada became embroiled in scandal, the peso, the stock markets and confidence
in the Philippines as a place to invest dropped as did his approval ratings dropped.
Foreign companies like Philips Electronics and Johnson & Johnson pulled out of the
Philippines. After his ouster in 2001 he left behind a huge budget deficit and debt
payments that were double what the country sent on health, education and agriculture
combined. The sick man of Asia was sicker than ever.

STATUS OF PHILIPPINE ECONOMY UNDER GLORIA MACAPAGAL ARROYO

Gloria Macapagal-Arroyo was welcomed with great fanfare when she became
president in 2001. The day she was sworn in, the stock market surged 30 percent and
businessmen praised her skills and abilities, Arroyo launched free market and anti-
corruption policies that were welcomed by both the local and international business
communities. Again, there was a sense of hope.

But again, the sense optimism didn’t last long. Investment dried up as a result of
global slowdowns and security concerns. Direct foreign investment was only $319
million in 2001 compared to $1.8 billion in 1992.

Growth was 3.4 percent in 2001, 4.3 percent in 2002 and 4.5 percent in 2003. In 2004
the economy was hurt by high oil prices. Still more growth was needed just to keep
pace with 2.36 percent population growth rate. Inflation was less than 6 percent but
the deficit grew at an alarming rate as the government spending increased and tax
revenues fell. Raising revenues became one of the main problems. In 2003, the deficit
reached $3.6 billion and debt was estimated to be over $100 billion. The government’s
debt burden reached its peak in 2004 when it settled at 74 percent of GDP.

Arroyo began her second term in 2004 with promises of “austerity and simplicity”
and the announcement of a reform package to fight corruption, attract foreign
investment, and make the Philippines less dependent on foreign energy. She
promised to create 10 million jobs by 2010 and announced that power rates would be
doubled to avert an energy crisis, she also promised to provide clean water and
electricity to every village in the Philippines and build 3,000 schools. The plan called
for the seemingly impossible combination of increased spending, higher taxes and a
balanced budget in five years.

Arroyo’s economic drive quickly lost momentum. She was unable to overcome
political opposition to privatizing companies like the National Power Corporation,
which lost $1.8 billion in 2003. Instead an effort was made to make them efficient. By
the end of her term much of her time was spent responding to charges that she rigged
the 2004 elections and he was husband was involved in kickback scheme with a
Chinese company involving millions of dollars.

Growth in 2003 and 2004 was around 5 percent due in art to rising demand for
Philippines electronic exports. Growth occurred despite continued hikes in oil and
consumer prices on top of typhoons and floods. Growth was 4.7 percent in 2005. That
year exports amounted to 40 percent of GDP. Many of the export items were
electronics. Two-thirds of Philippine imports are used to build exported computer
parts, disks and other electronic products made by local units of companies such as
Texas Instruments Inc. and Toshiba Corp.

STATUS OF PHILIPPINE ECONOMY UNDER NOYNOY AQUINO

The Philippines economy picks up in the 2000s under Benigno Aquino III. The
Philippine economy expanded by 7.2 percent in 2013, 6.8 percent in 2012, 3.7 percent
in 2011 and 7.6 percent in 2010. In 2012, gross domestic product surpassed the
government’s forecast for growth of 5 percent to 6 percent. The Philippines had the
second-highest growth rate in the world 2012, after China, according to Reuters.
Government expenditure in the Philippines jumped nearly 12 percent in 2012, while
private spending, which was bolstered by remittances from abroad, was up 6.1
percent, Reuters reported.

In 2012, Floyd Whaley wrote in the New York Times, “With $70 billion in reserves and
lower interest payments on its debt after recent credit rating upgrades, the
Philippines pledged $1 billion to the International Monetary Fund to help shore up the
struggling economies of Europe. “This is the same rescue fund that saved the
Philippines when our country was in deep financial trouble in the early ’80s,” said
Representative Mel Senen Sarmiento, a congressman from Western Samar. [Source:
Floyd Whaley, New York Times, August 27, 2012 /^\]

“The Philippines has certainly had a steady flow of positive economic news recently.
On July 4, 2012, Standard & Poor’s raised the country’s debt rating to just below
investment grade, the highest rating for the country since 2003 and equivalent to that
of Indonesia. The Philippines is the 44th-largest economy in the world today,
according to HSBC estimates. But if current trends hold, it can leap to the No. 16 spot
by 2050. The Philippine stock market, one of the best performers in the region, closed
at a record high after the recent S.& P. rating upgrade, and the country’s currency, the
peso, reached a four-year high against the dollar at about the same time.

“The gross domestic product of the Philippines grew 6.4 percent in the first quarter,
according to the country’s central bank, outperforming all other growth rates in the
region except China’s. Economists expect similarly strong growth in the second
quarter. “We have made a very bold forecast for the Philippines, but I think justifiably
so,” said Frederic Neumann, a senior economist at HSBC in Hong Kong.

“ Trinh D. Nguyen, an economist with HSBC in Hong Kong, said the Philippines had
benefited from an increase in government efficiency and revenue collection, as well
as aggressive actions to address corruption, like the impeachment of the chief justice
of the Supreme Court and the arrest of former President Gloria Macapagal Arroyo on
suspicion of accepting kickbacks and of misusing government lottery money. “It is
not only short-term growth that draws investors to the Philippines,” Ms. Nguyen said.
“The fundamentals are there.”

“But there are also real weaknesses in the country. Recent flooding, which by some
estimates submerged 50 percent of Manila, illustrates a shortage of modern
infrastructure that makes the Philippines highly vulnerable to disasters. “The
Philippines is hit with several deadly and devastating natural disasters every year,”
Ms. Nguyen said. But government officials have said that the recent flooding might
actually help economic growth, because reconstruction will require an increase in
public spending and the country will have to put into place programs to make it more
resistant to the effects of natural disasters.

“Another hurdle is the fact that the Philippines has traditionally underexploited its
natural resources. The government estimates that there are 21.5 billion tons of metal
deposits in the country, including large deposits of nickel, iron, copper and gold. But
they have never been a significant driver of economic growth because extraction has
been mismanaged, Mr. Neumann said. In the shorter term, there are concerns that the
country’s newfound prosperity has not sufficiently eradicated poverty.

STATUS OF PHILIPPINE ECONOMY UNDER DUTERTE ADMINISTRATION

Philippine economy grows 6.2% in Q3 2019

Panelo said according to the Philippine Statistics Authority, services posted the fastest
growth with 6.9%; followed by industry with 5.6%; and agriculture, hunting, forestry,
and fishing with 3.1%.
“Based on reports, this GDP puts the Philippines ahead of India, Indonesia, and even
China,” he said. The Palace official went on to commend the Duterte economic team
for “maintaining our 6 percent or above ‘fighting target’ for economic growth in
2019.” The government targets a 6-7 percent economic growth in 2019.
“Simply put, this means that we are back on track with President Rodrigo Roa
Duterte’s socioeconomic goal, including the objective to lower poverty incidence to
14% by the end of his term in 2022,” Panelo said.