Basic

Economic
Goals
 1. Economic Growth
2. Full Employment
3. Price Stability
4. Economic Freedom
5. Equitable Distribution of Income
6. Economic Security
7. Balance of Trade
1. Economic
Growth
 • Economic growth is the increase
in the value of an economy's
goods and services.
• Economic growth creates
more profit for businesses. As
What is a result, stock prices rise.
That gives
economic companies capital to invest
and hire more employees.
growth? • As more jobs are created,
incomes rise. Consumers have
more money to buy additional
products and services, and
purchases drive higher growth.
Gross domestic product is the
best way to measure economic
growth because it takes into
account the country's entire
economic output.

GDP includes all goods and

services that businesses in the
country produce for sale. It
doesn't matter whether they are
sold domestically or overseas.
All countries want positive
economic growth. This
makes economic growth the
most-watched economic
indicator.
Philippines GDP posted
a growth of 7.1
percent in the third
quarter of 2021
The Phases
of Economic PHILIPPINES: Gross Domestic Product (At Constant 2018 Prices)
Year-on-Year Growth Rate (in percent), Q1 2018-2019 to Q3 2020-2021
Growth
Expansion
The best phase is expansion. This
is when the economy is growing in
a sustainable fashion.

Recession
At some point, confidence in
economic growth dissipates. When
more people sell than buy, the
GDP posted a
economy contracts. When that phase
growth of 7.1
of the business cycle continues, it
percent in the third
becomes a recession.
quarter of 2021
 Fiscal
Ways to Spur Policy and
Monetary
Economic
Growth
Policy
 PH books P1.14-T budget deficit from
January to September 2021
FISCAL POLICY

The government stimulates

growth with expansive fiscal
policy. It either spends more,
cuts taxes, or both. They use of
expansive fiscal policy stimulate
the economy.

If the government keeps

spending more and taxing less, it
leads to deficit spending. It
works for a while but eventually
leads to higher debt levels. In
time, increasing debt-to-GDP
ratio slows economic growth.
 Stressing the
important
point!

Governments should then be careful with

expansive fiscal policy and should only use it when the
economy is in contraction or recession. When the
economy is growing, it should cut back spending and
raise taxes. This conservative fiscal policy ensures that
economic growth will remain sustainable.
 A nation's central bank can also
spur growth with monetary
policy. It can increase the money
MONETARY supply by lowering interest rates.
Banks make loans for auto,
POLICY school, and homes less
expensive. They also
reduce credit card interest rates.
All of these boost consumer
spending and economic growth.
2. Full
Employment
What is Meant by Full
Employment?
• From the economic point of view, it represents a waste of
society’s scarce (and valuable) resources. It thus lends to a
permanent loss of society’s potential output (GDP).

• If there is unemployment, society’s actual output or GDP is less

than society’s potential output. This is why, most modern
governments seek to pursue a policy of full employment.
 • A situation in which people who are willing to work at
existing wages are able to get jobs readily and quickly
move from one job to another if he so wishes.

Meaning of Full • According to Keynes, a situation of full employment is

Employment
said to exist if there is no involuntary unemployment.

• In a broad sense it refers to the full utilization of all

available labor (and other resources) so that the
economy is able to produce its potential output (GDP).
 ACHIEVING FULL EMPLOYMENT
Full employment can be achieved by using expansionary
demand-management: monetary and fiscal policies.
Monetary policy works through
changes in the rates of interest
and availability of bank credit.

For securing full employment it is

necessary to encourage private
investment and consumption
spending by relaxing any
restrictions on the commercial
banks’ lending activities and the
central bank, on behalf of the
government, will take steps to
bring about a fall in the rate of
interest.
 • To create jobs, the government can act in a direct manner by
increasing in own expenditures on goods and services while
leaving taxation unchanged.
Fiscal policy • Alternatively, it might stimulate private spending (both
works through a consumption and investment) by cutting taxes. Since the workers
have a high propensity to consume, an increase in unemployment
compensation may be an effective way of bringing about an
change in increase in consumption spending.
government • Private investment may be encouraged by offering incentives to
expenditure or a investors such as investment allowances or accelerated
depreciation (so that the entire benefits of depreciation can be
enjoyed in the very first year).
change in taxes
or in both at the • The government should budget for a deficit to create jobs. The
government could start road construction or slum clearance
same time. programs. But, fiscal policy often operates with a time lag.
However, in an economy like our own, with a fairly large public
sector, aggregate demand could be increased by raising the volume
of investment of the public sector enterprises, but, again, these
measures would not take effect immediately.
Full Employment
8.9% unemployment
rate na naitala
nitong Setyembre,
pinakamataas
ngayong 2021
3. Price Stability
Price Stability

The BSP's main responsibility is to formulate and

implement policy in the areas of money, banking and
credit with the primary objective of preserving price
stability. Price stability refers to a condition of low
and stable inflation. By keeping price stable, the
BSP helps ensure strong and sustainable economic
growth and better living standards.
Year-on-Year Regional Inflation Rates in Percent by Commodity
Group, September and October 2021 (2012 = 100)

• The country’s headline

inflation decelerated further
to 4.6 percent in October
2021, from 4.8 percent in
September 2021.

• Eight regions in AONCR

exhibited lower inflation
during the month. Among
the regions in AONCR, the
lowest inflation was still
recorded in Bangsamoro
Autonomous Region in
Muslim Mindanao (BARMM)
at 2.4 percent, while the
highest remained in Region
V (Bicol Region) at 6.6
percent.
 Price Stability - Inflation Targeting: The
BSP's Approach to Monetary Policy

• The primary objective of the BSP's monetary policy is “to promote price stability conducive
to a balanced and sustainable growth of the economy” (Republic Act 7653). The adoption
of inflation targeting framework of monetary policy in January 2002 is aimed at achieving this
objective.

• Inflation targeting is focused mainly on achieving a low and stable inflation, supportive of the
economy’s growth objective. This approach entails the announcement of an explicit inflation
target that the BSP promises to achieve over a given time period.

• To achieve the inflation target, the BSP uses a suite of monetary policy instruments in
implementing the desired monetary policy stance, depending on its assessment of the outlook
for inflation. If the BSP perceives the inflation forecast to exceed the target, then it
implements contractionary monetary policy to bring down inflation to its target path. On the
other hand, if the BSP sees the inflation forecast to be lower than the target or there is
need to increase liquidity in the financial system, then it can implement expansionary
monetary policy. The reverse repurchase (RRP) or borrowing rate is the primary monetary
policy instrument of the BSP.
Latest Policy Pronouncement from
Bangko Sentral ng Pilipinas

PH CENTRAL BANK
KEEPS INTEREST
RATE AT 2%
4. Economic Freedom
What is Economic Freedom?

Definition: Economic freedom is the

independency experienced by
individuals within a given society to
pursue their interests. It is the liberty to
engage and make choices about
economic activities and endeavors.
 FOR EXAMPLE, capitalist systems are normally the ones
that promote more economic freedom, compared with
communist or socialist systems. This freedom can be
practiced through free markets with a low level of
Economic freedom is government participation, free trade and adequate
private property protection. On the other hand,
a characteristic that economic freedom can also be guaranteed by having a
a particular diversified market where consumers have many options
to choose from to fulfill a particular need.
economic system
might posses or not.
What are the benefits of
economic freedom?
Economic freedom brings greater prosperity. The Index of
Economic Freedom documents the positive relationship
between economic freedom and a variety of positive social and
economic goals. The ideals of economic freedom are strongly
associated with healthier societies, cleaner environments,
greater per capita wealth, human development, democracy,
and poverty elimination.
Singapore topped the global ranking for
the 2nd year in a row in the Economic
Freedom Index 2021
5. An Equitable
Distribution of
Income
 • Equitable distribution of income ensures
distributing welfare to ensure fairness and allowing
members of the economy to have the same

What is it? •
opportunity to accumulate wealth.

The Government redistributes tax revenue to

ensure equitable distribution of wealth. Low-
income earners should receive an adequate
amount of support that assists in cost-of-living
pressures but does not compromise on reducing
the incentive to work and accumulate wealth.
What is the Target?
The Gini Coefficient measures the
percentage of wealth that is owned by a
percentage of the population.

A Gini Coefficient of 0 results in perfect

income equality which discourages the
incentive to work. Why work more when
you'll be taxed into the same income as
someone who works less.

A Gini Coefficient of 1 results in perfect

income inequality, where 1 person owns
all resources and income. Typically seen in
communist governments where all
resources are state owned and distributed
by government. A Gini Coefficient of 1
goes against capitalist ideology and does
not let resources to be allocated according
to the free market.
 Why is it Important?
Equitable distribution of income allows for social harmony and cohesion. If wealth
is too unevenly distributed, then majority members of an economy will be
disadvantaged at the expense of very few who are well off. Equitable distribution of
income also allows low income earners ability to access opportunities to grow
wealth. For example, the Australian Government has a New Enterprise Incentive
Scheme allowing the unemployed to access capital to start their own businesses.
Progressive tax system - those who earn more
income pay a larger amount of tax;
Educational grants, subsidies and low-interest loans;
Welfare and income support for low-income earners;
Compensation for low-income earners;
Wealth taxes.

How can the Government achieve a more

Equitable Distribution of Income?
Income Inequality in Philippines
6. ECONOMIC
SECURITY
Definitions: What we mean when we say, “economic security”?

Economic security is composed of

basic social security, defined by
access to basic needs infrastructure
pertaining to health, education,
dwelling, information, and social
protection, as well as work-related
security.
INCOME SECURITY

• Income security denotes adequate actual, perceived and expected

income, either earned or in the form of social security and other benefits.
It encompasses the level of income (absolute and relative to needs),
assurance of receipt, expectation of current and future income, both
during working life and in old age or disability retirement. Classic income
security protection mechanisms include a minimum wage machinery,
wage indexation, comprehensive social security, and progressive taxation.
REPRESENTATION SECURITY

• Representation security refers to both individual representation and

collective representation. Individual representation is about individual rights
enshrined in laws as well as the individuals’ access to institutions. Collective
representation means the right of any individual or group to be represented
by a body that can bargain on their behalf and which is sufficiently large,
sufficiently independent and sufficiently competent to do so. Independent
trade unions with the right to collectively bargain over wages, benefits, and
working conditions as well as to monitor working practices and strike have
been typical forms of granting representation security.
LABOUR MARKET SECURITY

• Labour market security arises when there are ample opportunities for
adequate income-earning activities. It has a structural component; in that
it represents the types and quantity of opportunities. Furthermore, it has
a cognitive side, as it also features expectations that opportunities are or
will become adequate. Policies aimed at enhancing this form of security
have included full-employment oriented macro-economic policies, the
creation of employment agencies, and other placing services.
EMPLOYMENT SECURITY

• Employment security is protection against loss of income-earning work. For

wage and salary workers, employment security exists in organizations and
countries, in which there is strong protection against unfair or arbitrary
dismissal and where workers can redress unfair dismissal. For the self-
employed, it means protection against sudden loss of independent work,
and/or business failure. Typical forms of enhancing employment security have
been protection against arbitrary dismissal, regulations on hiring and firing,
and imposition of costs on employers for failing to adhere to rules.
JOB SECURITY

• Job security signifies the presence of niches in organizations and

across labour markets allowing the workers some control over the
content of a job and the opportunity to build a career. Whereas
employment security refers to the opportunity of a worker to continue
working in an enterprise, job security refers to the worker’s ability to
pursue a line of work in conjunction with his or her interests, training
and skills. Protection mechanisms have consisted of barriers to skill
dilution such as craft boundaries, job qualifications, restrictive
practices, craft unions, etc.
WORK SECURITY

• Work security denotes working conditions in organizations that are safe

and promote workers’ well being. Classic “occupational health and
safety” provisions shielding workers from occupational hazards,
diseases, and injuries are an integral part. Work security goes beyond
this, though, in addressing the modern scourges of stress, overwork,
absenteeism, and harassment. Protection devices for work security
include provisions and insurance against accidents and illness at work,
and limits on working time.
SKILL REPRODUCTION SECURITY

• Skill reproduction security denotes workers’ access to basic

education as well as vocational training to develop capacities
and acquire the qualifications needed for socially and
economically valuable occupations. Ways to further skill
reproduction security include policies to generate widespread
opportunities to gain and retain skills through education,
apprenticeships, and employment training.
In times of conflict and crisis, the International Committee of the Red Cross (ICRC) Economic
Security Unit is on the front line, providing urgent relief and long-term support to those affected
by violence. Every year it puts millions of people on the road to recovery, helping them restore
their livelihoods and build a sustainable future.
Balance
of Trade
Balance of trade (BOT) is the difference
between the value of a country's imports
and exports for a given period and is the
largest component of a country's
balance of payments (BOP). What Is the
Balance of
A country that imports more goods and Trade (BOT)?
services than it exports in terms of value
has a trade deficit while a country that
exports more goods and services than it
imports has a trade surplus.
Philippine Top Export Statistics - January 2021
Summary of External Trade Performance
September 2020, August 2021r, and September 2021p
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