KAHALAGAHAN AT PARAAN NG PAGSUKAT NG PAMBANSANG KITA (GNI&GDP) // AP9 Q3 WK3 MELC 2// w/ computation

Is the Philippines a Developed Country?

Understanding National Income

• The national income refers to the total financial earnings of all sectors within a country, providing insight into economic production levels for a specific year.

• Comparing national income data over several years helps track economic direction and assess whether there is growth or decline in overall production.

• National income data serves as guidance for policymakers to create strategies aimed at improving citizens' living conditions and enhancing the country's economic performance.

Importance of Systematic Measurement

• Without systematic methods for measuring national income, assessments would be speculative and lack solid foundations.

• Inaccurate data can lead to unreliable conclusions about a country's economic status.

Methods of Measuring National Income

Gross National Income (GNI)

• GNI, formerly known as Gross National Product (GNP), measures the total market value of goods and services produced by a nation's residents, calculated in local currency (Philippine Peso).

• Only finished products and services are included in GNI calculations; intermediate goods are excluded to avoid double counting.

• For example, if thread is counted in GNI along with garments made from it, it results in double counting. Thus, only the garment's value is included.

Exclusions from GNI Calculation

• Products or services that do not generate monetary returns—like homegrown vegetables consumed by families—are not counted towards GNI.

• Informal sector activities such as street vendors or unregistered service providers are also excluded due to lack of reliable data on their production values.

Gross Domestic Product (GDP)

• GDP represents the total market value of goods and services produced within a country’s borders, regardless of ownership nationality.

• It includes contributions from foreign companies operating domestically but excludes earnings from Filipino workers abroad.

Key Distinctions Between GNI and GDP

• Earnings from Overseas Filipino Workers (OFWs), for instance, contribute to Philippine GNI but not its GDP since they work outside the country.

Approaches to Measuring GNI

Expenditure Approach

• The expenditure approach formula for calculating GNI is:

• GNI = C + G + I + X - M + SD + NFA

• Where:

• C = Personal consumption expenditures

• G = Government spending

• I = Investments by businesses

• X = Exports

• M = Imports

Understanding Economic Indicators: GNI, GDP, and Statistical Discrepancy

Key Concepts in National Accounting

• The value of imports is deducted from exports to determine the external sector's expenses related to product importation and exportation. This process highlights the importance of balancing trade.

• Net Factor Income from Abroad (NFIFA) is calculated by subtracting the expenses of citizens abroad from the expenses of foreigners within the country. This metric helps assess economic contributions from international activities.

• To compute Gross Domestic Product (GDP), one can use the formula: C + G + I + X - M + SD. When NFIFA is included, it results in Gross National Income (GNI). A negative statistical discrepancy indicates that this value should be subtracted rather than added.

Sector-Based Analysis of GNI and GDP

• The comparison between 2015 and 2016 focuses on which year had a higher GDP and GNI for Q2. The analysis also considers different sectors contributing to these figures.

• The formula for calculating GNI based on industry sources is A + I + S + NFIFA, where:

• A = Agriculture sector (includes farming, fishing, livestock)

• I = Industry sector (includes mining, manufacturing, utilities, construction)

Income-Based Approach to Economic Measurement

• Another method for determining economic performance uses income-based metrics with the formula: CE + NOS + D + IT - S.

• In this context:

• CE = Compensation of Employees refers to wages paid to workers by businesses.

• NOS = Net Operating Surplus represents profits earned by private corporations and government-owned enterprises.

• Depreciation (D) accounts for the reduction in physical asset value over time due to usage. Indirect taxes (IT), such as sales tax and customs duties, are also considered in this calculation.

• Subsidies (S) represent funds provided by the government without receiving goods or services in return; they play a role in influencing overall economic activity.