Republic of the Philippines

Cotabato City State Polytechnic College

College of Education

Name: Samal, Lady Mae B.

Year and Section: BSEd-Filipino 3A-NC (Morning Session)
Subject: Basic Economic Taxation and Agrarian Reform
Instructor: Mr. Sukarno Abas

CHAPTER IX
NATIONAL INCOME ACCOUNTING
GROSS NATIONAL PRODUCT (GNP)
 Is defined as the market value of all the final products produced by the resources of the
economy during a specified period of time usually one year.
 In the Philippines, we value goods in terms of peso. Therefore, GNP refers to the money
value of the total national production.
 The definition has three limitations
 The definition of GNP does not include products which are not produced by the
resources of the economy like imports. Since imports are not produced in the
country, it is excluded in the GNP.
 The definition only includes those products that can no longer be used for higher
stages of production and therefore, have reached the highest level of production
using the economy’s resources. Example: Different kinds of woods used to
manufacture furniture’s are not part of GNP since they are still in their
intermediate stage.
 The third limitation is time which eliminates those products not produced by the
economy within the period of time accounted.
GNP Purpose and Limitation
Economic Planning and Policy Making require a measure of aggregate economic
activities and an identification of their structures. These activities are reflected in the value of
products flowing in the circular flow, the production of which entails the use of the economic
resources.
The GNP camera is a tool which cannot picture the informal and undeclared activities in
the economy.
GNP ACCOUNTING: EXPENDITURE APPROACH
This approach identifies the final products and classifies them according to end use such
as consumption, government investment, and rest of the world known as exports.
The following equation shows the framework of Expenditure Approach
GNP = C + I + G + (X-M) +- NFY
Where C = Consumption Goods and Services
I = Investment Goods
G = Government Spending
X = Exports
M = Imports
(X-M) = Net Exports
NFY = Net Factor Income from Abroad
Consumption of Goods and Services
 These goods and services directly satisfy human wants and are used up or consumed
during the income period. These make up the largest part of a nation’s current flow of
output. Examples are consumer durables, consumer non-durables and consumer services.
Investment Goods
 This consist of capital goods and inventories which are used to produce more goods and
service. Gross investment refers to all the capital goods used in the production of goods
and services. Once these goods are used up an worn out, they have to be replaced. This is
the replacement investment.
Government Spending
 This refers to all the government expenditures used to maintain the operations of the
bureaucracy. This may be in the form of Public Goods and public Services.
Exports
 These are the goods that are being sold to other countries while imports are those goods
that are bought from other countries. When a country maintains its trade relation with
other countries, they are engaged in international trade.
Net Export (X-M)
 Net Export is Export minus Import. The ratio between a country’s imports to export is
Balance of Trade. When a country has more exports than import, there is a favorable
balance of trade. However, when there are more imports than exports, unfavorable
balance of trade is experienced.
Net Factor Income from Abroad
This is the difference between the aggregate flow of factor payments from (+) and to (-)
the rest of the world. A Positive net factor income from abroad can be attributed to inflows.
Positive Net Factor income from abroad is brought about by increase in exports as it consists of
payments for the use of the economy’s resources, salary remittances of Filipinos investing
abroad.
On the other hand, the negative net factor income from abroad can be attributed to
outflows. Negative net factor from abroad is experienced when there are more imports than
exports as it consists of payments for the economy’s use of foreign resources like profit
remittances of foreign multinational companies to their mother countries for their investment in
the Philippines. Also the salary remittances of foreigners working here in the Philippines can
contribute to negative net factor income.
Therefore, excluding Net Foreign Factor Income from GNP leaves the value of Gross
Domestic Product (GDP) which is the value of products produced by the resources in the
economy.
GNP ACCOUNTING: INCOME APPROACH
GNP Income Approach = PI + CI + GI = NI
Add: IT – S
DA
Where PI = Income of Persons
CI = Corporate Income
GI = Government Income
NI = National Income
IT = Indirect Tax
S = Subsidies
DA = Depreciation Allowance
Income of Persons
 GNP is equal to the additive values of factor contribution in the process of transforming
products into their final forms assuming all factor contributions as paid for to the
resource owners.
Corporate Income
 This is the income earned by the corporations which is considered to be undistributed.
This is part of the income earned but undistributed to its stockholders which means that
when corporations earn, part of the income of their dividends will not be distributed to
its stockholders but instead they will use this income for their expansion programs or to
boosts their operational capabilities.
Government Income from Capital
 This is the income earned by the government when they assume the business role and
becomes a factor contributor in essential areas where private enterprise creates a
vacuum. Government enterprises are also concerned part of the production system and
produces private goods and services.
Indirect Taxes
 These are the taxes indirectly paid to the government and are usually shouldered by the
consumers. Examples are Sales Tax, Value Added Tax, Amusement Tax and others.
Subsidies
 These are the financial help granted by the government to private and public enterprises.
These are subtracted from indirect taxes. Subsidies are excluded since they only bloat
profits and product values and do not entail production and factor contributions.
Capital Consumption Allowance or Depreciation Allowance
 This represents payments to the resource owners for the consumption of capital goods in
the production process and likewise considered as a factor contribution. Depreciation
allowance represents the fee for the present use of machines and equipment which have
been installed in the past.
Components of the Income Side
1. Compensation of the Employees
2. Net Opportunity Samples
3. Indirect Business Taxes Less subsidies
4. Depreciation
Components of the Expenditure Side
1. Personal Consumption Expenditure
2. Gross Domestic Capital Formation
2.1 Fixed Capital
2.2 Changes in Stocks
3. Government Consumption Expenditures
4. Exports
5. Imports
6. Net Factor Income from the Rest of the World
7. Statistical Discrepancy
What agency is responsible for the compilation of the National Accounts in the Philippines?
Presently, the Philippine Statistics Authority (PSA) through the Republic Act 10625
known as the Philippine Statistical Act of 2013, signed into law on September 12, 2013,
mandates PSA through the Macroeconomic Accounts, Service for the development and
maintenance of national accounts, regional accounts, satellite accounts, input-output tables and
other related macroeconomic accounts.
GDP growth rate drops by 16.5 percent in the second quarter of 2020; the lowest starting
1981 series
Reference Number: 2020-191
Release Date: 06 August 2020

16.5 percent in the second quarter of 2020, the lowest recorded quarterly growth starting 1981
series.
The main contributors to the decline were: Manufacturing, -21.3 percent; Construction, -33.5
percent; and Transportation and Storage, -59.2 percent. Among the major economic sectors, only
Agriculture, forestry, and fishing increased with 1.6 percent growth. Industry and Services both
decreased during the period by 22.9 percent and 15.8 percent, respectively.
On the expenditure side, major items that declined were: Household Final Consumption
Expenditure (HFCE), 15.5 percent; Gross Capital Formation (GCF), 53.5 percent; Exports, 37.0
percent; and Imports, 40.0 percent. On the other hand, Government Final Consumption
Expenditure (GFCE) posted positive growth of 22.1 percent.
Net Primary Income (NPI) from the Rest of the World and Gross National Income (GNI) both
decline by 22.0 percent and 17.0 percent respectively. Source: http://www.psa.gov.ph/national-
accounts