National Income National Income AccountingAccounting

Economics 11- UPLBEconomics 11- UPLBDepartment of Economics, CEMDepartment of Economics, CEM

National income National income accounting (NIA)accounting (NIA) is the measurement of indicators is the measurement of indicators

of national output/income; .e.g. of national output/income; .e.g. GDP, GNPGDP, GNP

Circular flow diagramCircular flow diagram summarizes the transactions summarizes the transactions

between the different economic between the different economic agents agents

agents: households, firms agents: households, firms (business), government, and (business), government, and foreigners (rest of the world) foreigners (rest of the world)

Circular flow diagramCircular flow diagram Assumption: The economy composed Assumption: The economy composed

of households and firms only of households and firms only Households: own factors of production, Households: own factors of production,

consume goods and serviceconsume goods and service Firms: hire factors of production to Firms: hire factors of production to

produce goods and servicesproduce goods and services

FIGURE 8.1. Circular flow diagram. The diagram above represents the transactions between firms and households in a simple economy.

In the upper loop, the arrow emanating from firms to households represents the sale by firms of goods and services to households. On the other hand, the arrow from households to firms represents the payments.

n the lower loop, the arrow originating from the households to the firms shows that firms hire labor and capital from households in order to produce goods and services. The arrow emanating from the firms indicates their payments for the use of the factors of production.

factor payments

(wages, interest, rent, profit)

factor services

goods and services

payments for goods and services

HOUSEHOLDSFIRMS

MARKETS FOR FACTORS OF PRODUCTION

MARKETS FOR GOODS AND SERVICES

FIRMS HOUSEHOLDS

Good and services bought

Good and services sold

Revenue (=GDP)

Spending (=GDP)

Inputs for Production

Land, labor and capital

Wages, rent, interest and profit (=GDP)

Flow of goods & services

Flow of money: pesos

Income (=GDP)

THE CIRCULAR FLOW DIAGRAM

Circular flow diagramCircular flow diagram Assumption: The economy Assumption: The economy

composed of households and firms composed of households and firms only only

Households: own factors of Households: own factors of production, consume goods and production, consume goods and serviceservice

Firms: hire factors of production to Firms: hire factors of production to produce goods and services produce goods and services

Circular flow diagramCircular flow diagram Upper loop of the circular flow Upper loop of the circular flow

diagram: transactions in the diagram: transactions in the goods and services marketsgoods and services markets

Lower loop: transactions in the Lower loop: transactions in the factor markets factor markets

With government and With government and foreign agentsforeign agents Need to account for :Need to account for :

a.a. Government purchases of goods and Government purchases of goods and services.services.

b.b. Government payments for factor services Government payments for factor services (wages, rent, interest). (wages, rent, interest).

c.c. Transfer paymentsTransfer payments between different agents. between different agents.d.d. Firms and households pay taxes to Firms and households pay taxes to

government. government. e.e. Taxes paid on income, property, goods and Taxes paid on income, property, goods and

services.services.f.f. Transactions with the foreign sector. Transactions with the foreign sector.

Transfer paymentsTransfer payments Transfer payments – are Transfer payments – are

transactions wherein one party is transactions wherein one party is not obliged to deliver a good or not obliged to deliver a good or service in return for the payment. service in return for the payment.

Examples: retirement benefits, Examples: retirement benefits, unemployment benefits, unemployment benefits, scholarships, and donationsscholarships, and donations..

Transactions with Transactions with foreign sectorforeign sector Includes sales of goods and Includes sales of goods and

services, assets, and transfersservices, assets, and transfers Exports - sales of domestically Exports - sales of domestically

produced goods to other produced goods to other countries countries

ImportsImports - - goods bought from goods bought from other countriesother countries

Measurement of economy’s output:Measurement of economy’s output:The Gross Domestic Product (GDP)The Gross Domestic Product (GDP)

The GDP measures the The GDP measures the market valuemarket value of all of all finalfinal goods and services produced within an goods and services produced within an economy in a given period. economy in a given period.

GDP only measures current production. GDP only measures current production. Transfer paymentsTransfer payments and transactions involving and transactions involving goods produced in other periods are not goods produced in other periods are not included in the calculation of GDP. included in the calculation of GDP.

GDP is usually expressed in the currency of a GDP is usually expressed in the currency of a particular country, e.g., Philippine particular country, e.g., Philippine peso….indicates the market value of the peso….indicates the market value of the goods and services goods and services

Definition of GDPDefinition of GDP The market value of good i The market value of good i

(V(Vii) is equal to P) is equal to PiiQQii GDP = sum of the market GDP = sum of the market

values of all final goods and values of all final goods and services produced within the services produced within the year.year.

n n

i i ii 1 i 1

GDP V P Q

GDP includes final GDP includes final goods and services goods and services onlyonly Final goods - goods and services that Final goods - goods and services that

are not purchased for the purpose of are not purchased for the purpose of producing other goods and services or producing other goods and services or for resale for resale – Eg. Rice (final) and palay or unhusked rice Eg. Rice (final) and palay or unhusked rice

(intermediate product)(intermediate product)

Including intermediate goods and final Including intermediate goods and final goods will result in “double counting”.goods will result in “double counting”.

3 Approaches for 3 Approaches for measuring GDPmeasuring GDP1.1. Expenditure ApproachExpenditure Approach (upper loop) – (upper loop) –

measures GDP as the sum of measures GDP as the sum of expenditures on final goods and services.expenditures on final goods and services.

2.2. Income ApproachIncome Approach (lower loop) – (lower loop) – measures GDP as the sum of incomes of measures GDP as the sum of incomes of factors of production (wages, rent, factors of production (wages, rent, interest and profit.interest and profit.

3.3. Value-added ApproachValue-added Approach – measures GDP – measures GDP as the sum of value added at each stage as the sum of value added at each stage of production (from initial to final stage)of production (from initial to final stage)

Expenditure ApproachExpenditure Approach Uses the upper loop of the circular flow diagram.Uses the upper loop of the circular flow diagram. Example: Suppose the economy has only one Example: Suppose the economy has only one

product, namely, rice.product, namely, rice.

GoodGood Price per Price per unitunit

Q soldQ sold ExpenditureExpenditure

RiceRice 2020 10001000 20,00020,000GDPGDP 20,00020,000

Income ApproachIncome Approach Uses the lower loop of the circular flow diagram: sum of Uses the lower loop of the circular flow diagram: sum of

payments to the various factors of production.payments to the various factors of production. Suppose that in the production of rice the sales and Suppose that in the production of rice the sales and

expenses are as follows:expenses are as follows:

SalesSales P 20,000P 20,000Expenses:Expenses: WagesWages 80008000 RentRent 40004000 InterestInterest 20002000 TotalTotal 14,00014,000 Profit Profit 6,0006,000GDP=Sum of Payments GDP=Sum of Payments to factorsto factors

20,00020,000 P 20,000P 20,000

Value Added ApproachValue Added Approach Suppose that rice is the only final product of an economy: Suppose that rice is the only final product of an economy:

It goes through several (3) stages of production.It goes through several (3) stages of production.

Stage of Prod’nStage of Prod’nValue of Value of

intermediaintermediate goodte good

Value of Value of SalesSales

Value-Value-addedadded

Farmer - PalayFarmer - Palay 12,00012,000 12,00012,000Rice Miller -Milled Rice Miller -Milled RiceRice

12,00012,000 15,00015,000 3,0003,000

Retailers - RiceRetailers - Rice 15,00015,000 20,00020,000 5,0005,000GDP= Total Value GDP= Total Value AddedAdded

20,00020,000

Notes of the 3 Notes of the 3 approachesapproaches The expenditure approach, income approach, and the The expenditure approach, income approach, and the

value-added approach all come up with the same value-added approach all come up with the same estimate of the GDP. They are estimate of the GDP. They are equivalentequivalent approaches. approaches.

In the income approach, In the income approach, profitprofit is also considered a is also considered a payment to the entrepreneur. So the incomes are (1) payment to the entrepreneur. So the incomes are (1) wages, (2) rent, (3) interest, and (4) profit. Profit wages, (2) rent, (3) interest, and (4) profit. Profit adjusts to make the sum equal to the final value of the adjusts to make the sum equal to the final value of the good.good.

In the value added approach, only the value added in In the value added approach, only the value added in each stage of production are included. If we add the each stage of production are included. If we add the value of intermediate product with the value of the final value of intermediate product with the value of the final product, we commit the sin of “double-counting.”product, we commit the sin of “double-counting.”

At each stage of production, the value-added is equal to At each stage of production, the value-added is equal to wages, interest, rent, and profit. Therefore the value of wages, interest, rent, and profit. Therefore the value of the final product is likewise the same of all payments to the final product is likewise the same of all payments to the factors of production.the factors of production.

Additional TopicsAdditional Topics GDP vs GNPGDP vs GNP Real vs current GDPReal vs current GDP Inter-country comparisons of GDPInter-country comparisons of GDP

– Convert to international currency Convert to international currency like US dollarslike US dollars

– Convert to per capita measuresConvert to per capita measures

THE NATIONAL ACCOUNTS OF THE THE NATIONAL ACCOUNTS OF THE PHILIPPINESPHILIPPINES

same principles as above but need to same principles as above but need to make adjustments in order to make adjustments in order to accommodate the realities in modern accommodate the realities in modern economies economies

Expenditure approach Expenditure approach – GDP = C + G + I + X –M+ SDGDP = C + G + I + X –M+ SD

Table. Expenditures on GDP, 2002 in million pesos.

Item Symbol ValuePersonal Consumption Expenditure

C 2,750,9000

Government Consumption Expenditure

G 488,700

Gross Domestic Capital Formation I 776,200Exports of Goods and Services X 1,968,500Less: Imports of Goods and Services

M 1,989,100

Statistical Discrepancy SD 27,500Gross Domestic Product GDP 4,022,700

Expenditure ApproachExpenditure Approach CC - spending of households and private non-profit institutions - spending of households and private non-profit institutions

on goods and serviceson goods and services– Non-durablesNon-durables - goods and services that are consumed - goods and services that are consumed

rapidlyrapidly– Durable goodsDurable goods - that last for a longer period of time - that last for a longer period of time

II - investment spending of domestic agents. Its major - investment spending of domestic agents. Its major components are “changes in” components are “changes in” Fixed CapitalFixed Capital and and Changes in Changes in StocksStocks

GG - government’s payments for the salaries of its workforce - government’s payments for the salaries of its workforce as well as purchases of goods and services as well as purchases of goods and services used for the used for the government’s day to day operations and projects. government’s day to day operations and projects.

XX - the spending of the rest of the world on goods and non- - the spending of the rest of the world on goods and non-factor services produced in the countryfactor services produced in the country

MM - the country’s purchases of goods and non-factor - the country’s purchases of goods and non-factor services from the rest of the world. services from the rest of the world.

SDSD - accounts for accounting and reporting errors in the - accounts for accounting and reporting errors in the accounts. Needed to ensure that GDP value from all accounts. Needed to ensure that GDP value from all approaches are the sameapproaches are the same

Income ApproachIncome ApproachITEMS SYMBOLS VALUE

Compensation of Employees

COE 1,093,800

Net Operating Surplus NOS 2,215,100

Depreciation D 357,200Indirect Business Taxes

less SubsidiesIBTS 356,600

Gross Domestic Product GDP 4,022,700

Income ApproachIncome Approach GDP = COE + NOS + D + IBTSGDP = COE + NOS + D + IBTS In a simple world, GDP = COE + NOS. In practice, In a simple world, GDP = COE + NOS. In practice,

require two adjustments (D and IBTS)require two adjustments (D and IBTS) DD - - accounts for the wear and tear of physical accounts for the wear and tear of physical

capitalcapital ““D” is treated as a business cost D” is treated as a business cost not included in not included in

NOS. However, “D” is part of “I” in the expenditure NOS. However, “D” is part of “I” in the expenditure side of the national accountsside of the national accounts

IBTS - includes taxes on the use or purchase goods IBTS - includes taxes on the use or purchase goods and services and grants from government to firms. and services and grants from government to firms. E. g sales taxes, value added taxE. g sales taxes, value added tax

Not included in NOS but is part of the market prices, Not included in NOS but is part of the market prices, of which the items in the expenditure accounts are of which the items in the expenditure accounts are quoted quoted

Value added or Industrial Origin Value added or Industrial Origin approachapproach

GDP = value added of different activities GDP = value added of different activities (sectors)(sectors)

ITEM VALUE

Agriculture, Fishery and Forestry

519,400

Industry 1,307,400

Services 2,123,900

Gross Domestic Product 4,022,700

The distinction between GDP The distinction between GDP and GNPand GNP GNP = GDP + GNP = GDP + Net Factor Income Net Factor Income

from the Rest of the Worldfrom the Rest of the World (NFIRW)(NFIRW)

NFIRW - measures the difference NFIRW - measures the difference between the earnings of between the earnings of Philippine residents in other Philippine residents in other countries and foreign residents in countries and foreign residents in the Philippinesthe Philippines

The distinction between GDP The distinction between GDP and GNPand GNP

Gross Domestic Product GDP 4,022,700

Net Factor Income from the Rest of the World

NFIRW 267,500

Gross National Product GNP 4,290,200

Nominal and Real GDP Nominal and Real GDP GDP at current prices or nominal GDP -GDP at current prices or nominal GDP - GDP GDP

measured using the prices of the year for which measured using the prices of the year for which it is calculatedit is calculated

Nominal GDP can be a misleading indicator of Nominal GDP can be a misleading indicator of changes in output or income because it also changes in output or income because it also embodies changes in the prices of goods and embodies changes in the prices of goods and services. services.

Real GDP or GDP at constant prices Real GDP or GDP at constant prices measures measures the total value of output using the prices of a the total value of output using the prices of a selected year (the base year). selected year (the base year).

Real GDP better for analysis overtime because Real GDP better for analysis overtime because it eliminates the effects of price changes it eliminates the effects of price changes

Table 8.5Table 8.5YEAR 1 YEAR 2

QUANTITY

Ice Cream 100 100 Buko Pie 100 100PRICE

Ice Cream 50 100 Buko Pie 100 200VALUE

Ice Cream 5,000 10,000 Buko Pie 10,000 20,000NOMINAL GDP 15,000 30,000

GDPGDPyear 1year 1 = (100) (50) + (100) (100) = 15,000 = (100) (50) + (100) (100) = 15,000 GDPGDPyear 2year 2 = (100) (50) + (100) (100) = 15,000 = (100) (50) + (100) (100) = 15,000 In practice, calculating real GDP using the In practice, calculating real GDP using the

previous approach is a tedious process previous approach is a tedious process because there are so many goods and because there are so many goods and services are produced in an economy. Can services are produced in an economy. Can simplify the calculation process by using the simplify the calculation process by using the GDP deflator.GDP deflator.

GDP deflator - a GDP deflator - a price indexprice index that allows us to that allows us to convert nominal GDP into real GDP. (note: convert nominal GDP into real GDP. (note: price index to be defined later)price index to be defined later)

Real GDPReal GDP

Nominal GDPReal GDP 100.GDP deflator

Calculation of Real Calculation of Real GDPGDP

Item 1990 1998 2002GDP at current

prices (million PhP)

1,072,000 2,665,100 4,022,700

GDP deflator (base year 1985) 149.5 300.1 384.6

GDP at constant prices (million PhP)

720,700 888,000 1,046,100

GDP Deflator, (1985=100), Philippines

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Inflation Rate, Philippines

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

perc

ent p

er y

ear

ItemItem Weight(In percent)

Food, Beverages and tobacco 55.1

Clothing 3.7

Housing and Repairs 14.7

Fuel, Light and Water 5.7

Services 12.3

Miscellaneous items 8.5

All Items 100.0

Source: National Statistics Office

TABLE A8.4. Weights used In the CPI, base year, 1994.

Inflation RateInflation Rate

1

1

Inflation Rate t t

t

CPI CPICPI

YearYear Consumer Price index(CPI)

Inflation rate(in percent)

1990 62.7 --1991 75.6 20.61992 83.8 10.81993 91.6 9.31994 100.0 9,21995 108.2 8.21996 117.3 8.41997 125.1 6.61998 137.9 10.2

Table A8.5 Estimates of the CPI and Inflation Rate, Table A8.5 Estimates of the CPI and Inflation Rate, 1990-981990-98

GDP (at 1985 Prices), Philippines

400.0

500.0

600.0

700.0

800.0

900.0

1000.0

1100.0

1200.0

1300.0

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

Year

Bill

ions

Real GDP at 1985 pricesReal GDP at 1985 prices

GDP per capitaGDP per capita Measures how much output or income was Measures how much output or income was

produced or received, on the average, by an produced or received, on the average, by an individual in an economy individual in an economy

Useful for comparing the performance of a Useful for comparing the performance of a country overtime and a country’s country overtime and a country’s performance relative to its neighborsperformance relative to its neighbors

GDPGDP per capitapopulation

Total population, Philippines, in million

0.0

10.0

20.0

30.0

40.050.0

60.0

70.0

80.0

90.0

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

Year

mill

ion

Population growth is quite high, about about 3% per year in 1980s and 2.3% per year nowadays.

Per capita GDPPer capita GDP

Item 1990 1998 2002

GDP at constant (million pesos) 720,700 888,000 1,046,100

Population (millions)62.0 75.2 81.8

Per capita GDP at constant prices 11,624.20 11,808.5 12,788.5

Per Capita GDP, Philippines, (at constant 1985 prices)

0.000

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05Year

Thou

sand

Pes

os

Modest and erratic growth in GDP plus high population growth means the per capita GDP growth is low.

ItemItem 19841984 19851985 19951995 19961996 19971997(1) GDP at current (1) GDP at current

prices (million prices (million pesos)pesos)

524,481524,481 571,883571,883 608,887608,887 2,171,922,171,9222

2.423.642.423.6400

(2) GDP deflator (2) GDP deflator (base year -(base year -1985)1985)

85.0185.01 100.00100.00 102.95102.95 255.78255.78 271.40271.40

(3) GDP at constant (3) GDP at constant prices (million prices (million pesos)pesos)

616,964616,964 571,883571,883 591,440591,440 849,137849,137 893,014893,014

(4) Per capita GDP (4) Per capita GDP at current prices at current prices (pesos)(pesos)

9,8909,890 10,52410,524 10,93510,935 30,20830,208 32,96132,961

(5) Per capita GOP (5) Per capita GOP at constant at constant prices (pesos) prices (pesos)

11,63411,634 10,52410,524 10,66210,662 11,81011,810 12,14512,145

(6) Population (6) Population (million persons)(million persons) 53.0353.03 54.3454.34 55.6855.68 71.9071.90 73.5373.53

TABLE 8.7. Selected output Indicators for the Philippines, selected TABLE 8.7. Selected output Indicators for the Philippines, selected yearsyears

Source: NSCB (1998), Philippine Statistical Yearbook.

GNP for cross country comparisonsGNP for cross country comparisons

Convert a country’s GNP to US Convert a country’s GNP to US dollars, or some common currency, dollars, or some common currency, by using the country’s exchange rateby using the country’s exchange rate

When comparing income across When comparing income across countries, it also makes sense to use countries, it also makes sense to use per capita estimates per capita estimates eliminates eliminates differences in population size. E.g. differences in population size. E.g. (data is for 1998)(data is for 1998)

PPP Adjusted GNPPPP Adjusted GNP PPP – purchasing power parityPPP – purchasing power parity GNP is adjusted to account for the GNP is adjusted to account for the

fact that 1 USD when spent in one fact that 1 USD when spent in one country does not buy the same country does not buy the same quantity of goods when spent in quantity of goods when spent in another countryanother country– E.g. Philippines, 1998 per capita GNP (in E.g. Philippines, 1998 per capita GNP (in

USD) = 1050USD) = 1050– per capita GNP (PPP adjusted, in USD) = per capita GNP (PPP adjusted, in USD) =

3,5403,540

Exchange Rate (P/US$), Philippines, 1988-2005

0.00

10.00

20.00

30.00

40.00

50.00

60.00

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Peso

s pe

r dol

lar

Exchange Rate 1988-2002Exchange Rate 1988-2002

Per Capita GNI Per Capita GNI Poverty rateMyanmar b 217 26.6

Nepal 250 30.9

Cambodia 350 34.7

Lao PDR 390 33.5

Bangladesh 440 49.8

Viet Nam 540 19.5

Pakistan 600 32.6

India 620 26.1

Sri Lanka 1010 22.7

Indonesia 1140 18.2

Philippines 1170 30.0

China 1500 3.1

Thailand 2490 9.8

Malaysia 4520 7.5

Korea, Rep. of 14000 3.6

Taiwan 14770 0.8

Singapore 24760 0.0

PER CAPITA GROSS NATIONAL INCOME, 2004 (US$)

GNP Per Capita (in US$), 1998 and 2003

0

500

1000

1500

2000

2500

3000

3500

4000

4500

China Indonesia Lao PDR Malaysia Philippines Thailand Viet Nam

1998

2003

GDP Per Capita PPP$, 2000 prices

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Philipp

ines

Indon

esia

Malays

ia

Thaila

nd

Korea,

Rep.

Vietnam

China

1980

2005

Annual Growth GDP, 1980-2005 (% per year)

0.63

3.7 3.65

4.59

5.534.87

8.49

0

1

2

3

4

5

6

7

8

9

Philippines Indonesia Malaysia Thailand Korea, Rep. Vietnam China

Perc

ent

Annual Growth GDP, 2000-2005 (% per year)

2.53.3 3.0

4.14.6

6.1

8.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Philippines Indonesia Malaysia Thailand Korea,Rep.

Vietnam China

Perc

ent

TABLE 8.8. Economic indicators for selected countries, 1998.

Country Population(in millions)

GNP1

(in billions)Per capita GNP1

In US DollarsPPP adjusted per

capita GNP*

France 59 1,466.2 24,940 22,320

Germany 82 2,122.7 25.850 20,810Indonesia 204 138.5 680 2,790Japan 126 4,089.9 32,380 23,180Malaysia 22 79.8 3,600 6,990Philippines 75 78.9 1,050 3,540Singapore 3 95.1 30,060 28,620Thailand 61 134.4 2.200 5,840United Kingdom 59 1,263.8 21.400 20.640United States 270 7,921.3 29.340 29.340

Source: World Bank (1999), World Development Report.

PHILIPPINES: Key Economic Indicators, 2003PHILIPPINES: Key Economic Indicators, 2003

RegionRegionPer CapitaPer Capita

GRDP IndexGRDP IndexPhil=100Phil=100

Composition of GRDP(%)Composition of GRDP(%) GRDP Growth GRDP Growth Rates, Rates,

(1985- -(1985- -2003 (%)2003 (%)

AgricultureAgriculture IndustryIndustry ServicesServices

PhilippinesPhilippines 100.0100.0 15.015.0 31.831.8 53.253.2 3.13.1NCRNCR 275.8275.8 -- 37.137.1 62.962.9 3.43.4CARCAR 129.9129.9 11.011.0 56.556.5 32.532.5 6.46.4IlocosIlocos 53.753.7 36.036.0 8.98.9 55.155.1 2.52.5Cagayan ValleyCagayan Valley 52.352.3 45.845.8 7.57.5 46.746.7 2.82.8C. LuzonC. Luzon 75.275.2 20.520.5 32.732.7 46.846.8 3.03.0S. TagalogS. Tagalog 85.785.7 20.220.2 37.537.5 42.342.3 3.53.5BicolBicol 43.343.3 22.722.7 16.116.1 61.261.2 2 22 2W. VisayasW. Visayas 83.583.5 22.622.6 25.725.7 51.751.7 2.92.9C. VisayasC. Visayas 93.493.4 10.410.4 27.927.9 61.761.7 3.73.7E. VisayasE. Visayas 50.550.5 29.929.9 25.725.7 44.444.4 2.02.0W. MindanaoW. Mindanao 62.162.1 40.240.2 14.814.8 45.045.0 2.42.4N. MindanaoN. Mindanao 101.8101.8 28.628.6 30.230.2 41.241.2 2.72.7S. MindanaoS. Mindanao 92.492.4 25.225.2 25.225.2 49.649.6 1.71.7C. MindanaoC. Mindanao 76.676.6 40.240.2 28.028.0 31.831.8 3.43.4ARMMARMM 23.223.2 48.648.6 10.310.3 41.141.1 2.52.5CaragaCaraga 47.847.8 38.038.0 18.018.0 44.044.0 2.12.1

REGIONREGION 1975-851975-85 1985-951985-95 1995-20031995-2003 1975-20031975-2003PhilippinesPhilippines 2.52.5 2.52.5 3.93.9 3.23.2LuzonLuzon 2.62.6 2.82.8 4.04.0 3.43.4 NCRNCR 2.42.4 2.82.8 4.34.3 3.43.4 Central Luzon &Central Luzon & S. TagalogS. Tagalog

2.62.6 3.13.1 3.63.6 3.43.4 Other Luzon Other Luzon 3.03.0 2.32.3 4.34.3 3.43.4VisayasVisayas 2.42.4 2.12.1 4.04.0 3.23.2 Central Central

VisavasVisavas2.72.7 2.62.6 4.84.8 3.73.7

Other Other VisayasVisayas

2.32.3 1.71.7 3.43.4 2.82.8

MindanaoMindanao 2.22.2 1.71.7 3.63.6 2.62.6

PHILIPPINES: Average growth of regional GDP (in 1985 prices)

REGIONREGION 1975-1975-8585

1985-1985-9595

1995-1995-20032003

1975-1975-20032003

PhilippinesPhilippines 100100 100 100 100100 100100LuzonLuzon 62.662.6 64.864.8 66.466.4 64.564.5 NCRNCR 28.828.8 31.631.6 34.434.4 31.531.5 Central Luzon &Central Luzon & S.TagalogS.Tagalog

23.323.3 23.223.2 21.921.9 22.822.8 Other Luzon Other Luzon 10.510.5 10.010.0 10.110.1 10.210.2VisayasVisayas 16.716.7 16.316.3 15.815.8 16.216.2 Central Central

VisavasVisavas6.46.4 6.56.5 6.76.7 6.56.5

Other Other VisayasVisayas

10.310.3 9.89.8 9.19.1 9.79.7

MindanaoMindanao 20.820.8 19.019.0 17.217.2 19.119.1

PHILIPPINES: Share of National GDP

Personal Disposable IncomePersonal Disposable Income

Personal disposable incomePersonal disposable income represents represents the income that households are free to the income that households are free to spend or save. spend or save.

It excludes the components of national It excludes the components of national income that do not accrue directly to income that do not accrue directly to households. households.

It also includes a few items that are It also includes a few items that are not part of national income but not part of national income but nonetheless influence the amount of nonetheless influence the amount of income that households can spend. income that households can spend.

Item Number

Item Amount

1 Net operating surplus of households and unincorporated business 1,062,0912 Compensation of employees, net 910,2593 Total (Items 1 and 2) 1,972,3504 Interest on public debt from the general government 73,9575 Other property Income 188,6996 Social security benefits 138,8467 Casualty insurance claims 1,3048 Current transfers 68.3969 Total (Items 4 to 8) 371,20210 Interest payments on consumer debt 7,98411 Other payments 22,63412 Direct taxes 90.26813 Compulsory fees, fines and penalties 29,18114 Net casualty insurance premiums 130415 Social security contributions 53,62916 Other current transfers 11,79717 Total (Items 10 to 15) 216,79718 Disposable Income (Item 3 +Item - Item 17) 2,126,755

Table 8.9 Personal Disposable Income, Philippines, 1998 (in million pesos

Some Limitations of GDP or Some Limitations of GDP or GNP as measures of growthGNP as measures of growth Ignores income distributionIgnores income distribution Ignores environmental degradationIgnores environmental degradation Does not include activities that do Does not include activities that do

not go through the formal markets not go through the formal markets sectorssectors

Does not include “illegal” activities Does not include “illegal” activities like drug trafficking, prostitution, like drug trafficking, prostitution, moonlightingmoonlighting