Republic of the Philippines

Asian Development Foundation

Tacloban, City

COMPREHENSIVE REPORT
In
PHILIPPINE ECONOMY AND
THE GOVERNMENT

Submitted By:
JENNEFREN B. PUNDAVELA
MA.ED Social Studies

Submitted To:
DR. OFELIA N. ALCOBER
Professor
 A. PHILIPPINE ECONOMY
Topic: Meaning and Concepts of Economy

Economics is a social science that focuses on the production,

distribution, and consumption of goods and services, and analyzes the
choices that individuals, businesses, governments, and nations make to
allocate resources.

 An economy is a system of inter-related production and

consumption activities that ultimately determine the allocation of
resources within a group. The production and consumption of
goods and services as a whole fulfill the needs of those living and
operating within it.
 Economics is the study of how people allocate scarce resources for
production, distribution, and consumption, both individually and
collectively.
 The two branches of economics are microeconomics and
macroeconomics.

Microeconomics
 Microeconomics studies how individual consumers and firms
make decisions to allocate resources. Whether a single person, a
household, or a business, economists may analyze how these
entities respond to changes in price and why they demand what
they do at particular price levels.
 Microeconomics analyzes how and why goods are valued
differently, how individuals make financial decisions, and how
they trade, coordinate, and cooperate.
 Within the dynamics of supply and demand, the costs of
producing goods and services, and how labor is divided and
allocated, microeconomics studies how businesses are organized
and how individuals approach uncertainty and risk in their
decision-making.

Macroeconomics
 Macroeconomics is the branch of economics that studies the
behavior and performance of an economy as a whole. Its
primary focus is the recurrent economic cycles and broad
economic growth and development.
 It focuses on foreign trade, government fiscal and monetary
policy, unemployment rates, the level of inflation, interest
rates, the growth of total production output, and business
 cycles that result in expansions, booms, recessions, and
depressions.
 Using aggregate indicators, economists use macroeconomic
models to help formulate economic policies and strategies.

Economist
 An economist studies the relationship between a society's
resources and its production or output, and their opinions help
shape economic policies related to interest rates, tax laws,
employment programs, international trade agreements, and
corporate strategies.
 Economists analyze economic indicators, such as gross
domestic product and the consumer price index to identify
potential trends or make economic forecasts.
 According to the Bureau of Labor Statistics, 36% of all
economists in the United States work for a federal or state
agency. Economists are also employed as professors, by
corporations, or as part of economic think tanks.

Economic Indicator
 Economic indicators detail a country's economic performance.
Published periodically by governmental agencies or private
organizations, economic indicators often have a considerable
effect on stocks, employment, and international markets, and
often predict future economic conditions that will move
markets and guide investment decisions.

Gross Domestic Product

 The gross domestic product (GDP) is considered the broadest
measure of a country's economic performance. It calculates the
total market value of all finished goods and services produced
in a country in a given year. The Bureau of Economic
Analysis (BEA) also issues a regular report during the latter
part of each month. Many investors, analysts, and traders
focus on the advance GDP report and the preliminary report,
both issued before the final GDP figures because the GDP is
considered a lagging indicator, meaning it can confirm a trend
but can't predict a trend.

Consumer Price Index

 The Consumer Price Index (CPI), also issued by the BLS,
measures the level of retail price changes, and the costs that
consumers pay, and is the benchmark for measuring inflation.
Using a basket that is representative of the goods and services
in the economy, the CPI compares the price changes month
 after month and year after year.8 This report is an important
economic indicator and its release can increase volatility in
equity, fixed income, and forex markets.
Topic: The Development of Philippine Economy

The Philippines has been one of the most dynamic economies in the East
Asia Pacific region. Average annual growth increased to 6.4% between 2010-
2019 from an average of 4.5% between 2000-2009. With increasing
urbanization, a growing middle class, and a large and young population, the
Philippines’ economic dynamism is rooted in strong consumer demand
supported by a vibrant labor market and robust remittances. Business
activities are buoyant with notable performance in the services sector including
business process outsourcing, real estate, tourism, and finance and insurance
industries.
The Philippine economy has also made progress in delivering inclusive
growth, evidenced by a decline in poverty rates and its Gini coefficient. Poverty
declined from 23.3% in 2015 to 16.6% in 2018 while the Gini coefficient
declined from 44.9 to 42.7 over the same period.
However, the COVID-19 pandemic and community quarantine measures
imposed in the country have severely impacted economic growth and poverty
reduction. Growth contracted significantly in 2020, driven by heavy declines in
consumption and investment growth, and exacerbated by the slowdown in
tourism and remittances. Similarly, the previous trend in real wages, which is
expected to have a positive impact on household incomes—particularly those
from the lower income groups—has been severely hampered by the impact of
the COVID-19, with negative consequences also for poverty reduction in the
Philippines.
Nevertheless, the economy has started to recover with a 5.6% year-on-
year expansion in 2021, buoyed by public investment and a recovery in the
external environment. With continued recovery and reform efforts, the country
is getting back on track on its way from a lower middle-income country with a
gross national income per capita of US$3,430 in 2020 to an upper middle-
income country (per capita income range of US$4,096–US$12,695) in the short
term. The economy is expected to further rebound, drawing strength from the
recovering domestic environment with declining COVID-19 cases and wider
economic reopening. Still, the economy faces downside risks from the weak
external environment, reeling from an expected global growth deceleration,
rising inflation, and geopolitical turmoil. The recovery is expected to also have
overall positive impact on poverty reduction.
 Topic: Policies and Challenges on Philippine Economy

The Philippines has traditionally had a private enterprise economy both

in policy and in practice. The government intervened primarily through fiscal
and monetary policy and in the exercise of its regulatory authority. Economic
planning was limited largely to establishing targets for economic growth and
other macroeconomic goals, engaging in project planning and implementation,
and advising the government in the use of capital funds for development
projects.

Monetary Policy
The Central Bank of the Philippines was established in June 1948 and
began operation the following January. It was charged with maintaining
monetary stability; preserving the value and covertibility of the peso; and
fostering monetary, credit, and exchange conditions conducive to the economic
growth of the country. In 1991 the policy-making body of the Central Bank was
the Monetary Board, composed of the governor of the Central Bank as
chairman, the secretary of finance, the director general of the National
Economic and Development Authority, the chairman of the Board of
Investment, and three members from the private sector. In carrying out its
functions, the Central Bank supervised the commercial banking system and
managed the country's foreign currency system.
From 1975 to 1982, domestic saving (including capital consumption
allowance) averaged 25 percent of GNP, about 5 percentage points less than
annual gross domestic capital formation. This resource gap was filled with
foreign capital. Between 1983 and 1989, domestic saving as a proportion of
GNP declined on the average by a third, initially because of the impact of the
economic crisis on personal savings and later more because of negative
government saving. Investment also declined, so that for three of these years,
domestic savings actually exceeded gross investment.
At the start of the 1980s, the government introduced a number of
monetary measures built on 1972 reforms to enhance the banking industry's
ability to provide adequate amounts of long-term finance. Efforts were made to
broaden the capital base of banks through encouraging mergers and
consolidations. A new class of banks, referred to as "expanded commercial
banks" or "unibanks," was created to enhance competition and the efficiency of
the banking industry and to increase the flow of long-term saving. Qualifying
banks--those with a capital base in excess of P500 million--were allowed to
expand their operations into a range of new activities, combining commercial
banking with activities of investment houses. The functional division among
other categories of banks was reduced, and that between rural banks and thrift
banks eliminated.
Fiscal Policy
Historically, the government has taken a rather conservative stance on
fiscal activities. Until the 1970s, national government expenditures and
taxation generally were each less than 10 percent of GNP. (Total expenditures
of provincial, city, and municipal governments were small, between 5 and 10
percent of national government expenditures in the 1980s.) Under the Marcos
regime, national government activity increased to between 15 and 17 percent of
GNP, largely because of increased capital expenditures and, later, growing
debt-service payments. In 1987 and 1988, the ratio of government expenditure
to GNP rose above 20 percent. Tax revenue, however, remained relatively
stable, seldom rising above 12 percent of GNP. Chronic government budget
deficits were covered by international borrowing during the Marcos era and
mainly by domestic borrowing during the Aquino administration. Both
approaches contributed to the vicious circle of deficits generating the need for
borrowing, and the debt service on those loans creating greater deficits and the
need to borrow even more. At 5.2 percent of GNP, the 1990 government deficit
was a major consideration in the 1991 standby agreement between Manila and
the IMF.
Over time, the apportionment of government spending has changed
considerably. In 1989 the largest portion of the national government budget
(43.9 percent) went for debt servicing. Most of the rest covered economic
services and social services, including education. Only 9.1 percent of the
budget was allocated for defense. The Philippines devoted a smaller proportion
of GNP to defense than did any other country in Southeast Asia.
Monetary and fiscal policies that were set by the government in the early
1980s, contributed to large intermediation margins, the difference between
lending and borrowing rates. In 1990 the reserve requirement was revised
upward twice, going from 21 percent to 25 percent. In addition, the government
levied both a 5 percent gross tax on bank receipts and a 20 percent tax on
deposit earnings, and borrowed extensively to cover budget deficits and to
absorb excess growth in the money supply.

Development Planning
The responsibility for economic planning was vested in the National
Economic and Development Authority. Created in January 1973, the authority
assumed the mandate both for macroeconomic planning that had been
undertaken by its predecessor organization, the National Economic Council,
and project planning and implementation, previously undertaken by the
Presidential Economic Staff. National Economic and Development Authority
plans calling for the expansion of employment, maximization of growth,
attainment of fiscal responsibility and monetary stability, provision of social
services, and equitable distribution of income were produced by the Marcos
administration for 1974-77, 1978-82, and 1983-88, and by the Aquino
administration for 1987-92. Growth was encouraged largely through the
provision of infrastructure and incentives for investment by private capital.
Equity, a derivative goal, was to be achieved as the result of a dynamic
economic expansion within an appropriate policy environment that emphasized
labor intensive production.

REFERRENCES:

Ronald E. Dolan, ed. Philippines: A Country Study. Washington: GPO for the
Library of Congress, 1991.

U.S. Library of Congress

http://countrystudies.us/philippines/
COMPREHENSIVE REPORT
in
Philippine gOVERNMENT
 B. PHILIPPINE GOVERNMENT
Topic: Form of Government of the Philippines

The Government of the Philippines (Filipino: Pamahalaan ng Pilipinas)

has three interdependent branches: the legislative, executive, and judicial
branches. The Philippines is governed as a unitary state under
a presidential representative and democratic constitutional republic in which
the president functions as both the head of state and the head of
government of the country within a pluriform multi-party system.
The powers of the three branches are vested by the Constitution of the
Philippines in the following: Legislative power is vested in the two-
chamber Congress of the Philippines—the Senate is the upper chamber and
the House of Representatives is the lower chamber.[1] Executive power is
exercised by the government under the leadership of the president. Judicial
power is vested in the courts with the Supreme Court of the Philippines as the
highest judicial body.
The legislative power is vested in the Congress of the Philippines which
consists of the Senate of the Philippines and the House of Representatives. The
upper house is located in Pasay, while the lower house is located in Quezon
City; both are in Metro Manila. The district and sectoral representatives are
elected for a term of three years; they can be re-elected but they may not run
for a fourth consecutive term.
Senators are elected to a term of six years; they can be re-elected but
may not run for a third consecutive term. The House of Representatives may
opt to pass for a vacancy of a legislative seat, which leads to a special election.
The winner of the special election will serve the unfinished term of the previous
district representative, and will be considered as one elective term. The same
rule also applies in the Senate; however, it only applies if the seat was vacated
before a regular legislative election.
The current president of the Senate is Juan Miguel Zubiri, and
the speaker of the House of Representatives is Martin Romualdez.
The president and vice president are elected separately by national
popular vote. The vice president is first in line to succession if the president
resigns, is removed after impeachment, or dies. The vice president is usually,
though not always, a member of the president's cabinet. If there is a vacancy in
the position of vice-president, the president will appoint any member of
Congress (usually a party member) as the new vice president. The appointment
must then be validated by a three-fourths vote of the Congress.
The judicial power is vested in the Supreme Court of the Philippines and
lower courts established by law. The Supreme Court, which has a chief
justice as its head and 14 associate justices, occupies the highest tier of the
judiciary. The justices serve until the age of 70. The justices are appointed by
the president on the recommendation of the Judicial and Bar Council of the
Philippines.

Topic: The Three Branches of the Philippine Government and their

Function

Executive Branch

The executive branch is headed

by the President who functions
as both the
head of state and the head of
government. The president is
also the
Commander-in-Chief of the
Armed Forces of the
Philippines. The president is
elected by popular vote to a
term of six years. The president,
then, appoints
(and may dismiss) his/her
cabinet members whom he/she
presides over. The
executive seat of government is
administered officially from
Malacañang
Palace—also the official
residence of the president—in
Manila. The President
may no longer run for re-
election, unless he/she becomes
president through
constitutional succession and
has served for no more than
four years as
president.
The executive branch is headed
by the President who functions
as both the
head of state and the head of
government. The president is
also the
Commander-in-Chief of the
Armed Forces of the
Philippines. The president is
elected by popular vote to a
term of six years. The president,
then, appoints
(and may dismiss) his/her
cabinet members whom he/she
presides over. The
executive seat of government is
administered officially from
Malacañang
Palace—also the official
residence of the president—in
Manila. The President
may no longer run for re-
election, unless he/she becomes
president through
constitutional succession and
has served for no more than
four years as
president.
The executive branch is headed
by the President who functions
as both the
head of state and the head of
government. The president is
also the
Commander-in-Chief of the
Armed Forces of the
Philippines. The president is
elected by popular vote to a
term of six years. The president,
then, appoints
(and may dismiss) his/her
cabinet members whom he/she
presides over. The
executive seat of government is
administered officially from
Malacañang
Palace—also the official
residence of the president—in
Manila. The President
may no longer run for re-
election, unless he/she becomes
president through
constitutional succession and
has served for no more than
four years as
president.
The executive branch is headed
by the President who functions
as both the
head of state and the head of
government. The president is
also the
Commander-in-Chief of the
Armed Forces of the
Philippines. The president is
elected by popular vote to a
term of six years. The president,
then, appoints
(and may dismiss) his/her
cabinet members whom he/she
presides over. The
executive seat of government is
administered officially from
Malacañang
Palace—also the official
residence of the president—in
Manila. The President
may no longer run for re-
election, unless he/she becomes
president through
constitutional succession and
has served for no more than
four years as
president.
The executive branch is headed
by the President who functions
as both the
head of state and the head of
government. The president is
also the
Commander-in-Chief of the
Armed Forces of the
Philippines. The president is
elected by popular vote to a
term of six years. The president,
then, appoints
(and may dismiss) his/her
cabinet members whom he/she
presides over. The
executive seat of government is
administered officially from
Malacañang
Palace—also the official
residence of the president—in
Manila. The President
may no longer run for re-
election, unless he/she becomes
president through
constitutional succession and
has served for no more than
four years as
president
The executive branch is headed
by the President who functions
as both the
head of state and the head of
government. The president is
also the
Commander-in-Chief of the
Armed Forces of the
Philippines. The president is
elected by popular vote to a
term of six years. The president,
then, appoints
(and may dismiss) his/her
cabinet members whom he/she
presides over. The
executive seat of government is
administered officially from
Malacañang
Palace—also the official
residence of the president—in
Manila. The President
may no longer run for re-
election, unless he/she becomes
president through
constitutional succession and
has served for no more than
four years as
president
The executive branch is headed
by the President who functions
as both the
head of state and the head of
government. The president is
also the
Commander-in-Chief of the
Armed Forces of the
Philippines. The president is
elected by popular vote to a
term of six years. The president,
then, appoints
(and may dismiss) his/her
cabinet members whom he/she
presides over. The
executive seat of government is
administered officially from
Malacañang
Palace—also the official
residence of the president—in
Manila. The President
may no longer run for re-
election, unless he/she becomes
president through
constitutional succession and
has served for no more than
four years as
president
The executive branch is headed
by the President who functions
as both the
head of state and the head of
government.
The executive branch is headed
by the President who functions
as both the
head of state and the head of
government.
The executive branch is headed by the President who functions as both
the head of state and the head of government. The president is also the
Commander-in-Chief of the Armed Forces of the Philippines. The president is
elected by popular vote to a term of six years. The president, then, appoints
(and may dismiss) his/her cabinet members whom he/she presides over. The
executive seat of government is administered officially from Malacañang Palace
—also the official residence of the president—in Manila. The President may no
longer run for re-election, unless he/she becomes president through
constitutional succession and has served for no more than four years as
president.
The second highest official, the vice-president is first in line to
succession should the president resign, be impeached or die in office. The vice-
president usually, though not always, may be a member of the president's
cabinet. If there is a vacancy in the position of Vice President, the President will
appoint any member of Congress (usually a party member) as new Vice
President. The appointment will be validated by a three-fourths vote of
Congress voting separately.
Legislative Branch

The remainder of the House seats are designated for sectoral

representatives elected at large through a complex "party list" system, hinging
on the party receiving at least 2% to 6% of the national vote total. The upper
house is located in Pasay City, while the lower house is located in Quezon City.
The district and sectoral representatives are elected with a term of three years.
They can be re-elected but they are no longer eligible to run for a fourth
consecutive term. The senators are elected to a term of six years. They can be
re-elected but they are no longer eligible to run for a third consecutive term.
The House of Representatives may opt to pass a resolution for a vacancy of a
legislative seat that will pave way for a special election. The winner of the
special election will serve the unfinished term of the previous district
representative; this will be considered as one elective term. The same rule
applies in the Senate however it only applies if the seat is vacated before a
regular legislative election.

Judiciary Branch

The judiciary branch of the government is headed by the Supreme Court,

which has a Chief Justice as its head and 14 Associate Justices, all appointed
by the president on the recommendation of the Judicial and Bar Council. Other
court types of courts, of varying jurisdiction around the archipelago, are the:
Lower Collegiate Courts
 Court of Appeals  Court of Tax Appeals  Sandigang bayan
Regular Courts
Regional Trial Courts  Metropolitan Trial Courts  Municipal Trial Courts 
Municipal Trial Courts in Cities  Municipal Circuit Trial Courts
Muslim Courts
 Sharia District Courts  Sharia Circuit Courts

Topic: The Structured Spheres of the Philippine Government

Modeled after the American system, the Philippine national government

has an executive branch and president, a bicameral legislature with a House of
Representatives and a Senate, and a judicial branch with the Philippine
Supreme Court presiding over the federal court system. Administratively, the
Philippines is broken down into successively smaller political units. Below the
national government there exist the provinces and independent cities, then
municipalities, and finally the barangay. The barangay is significant because it
addresses local governing issues from laws, to development, to festival
preparation. The barangay also plays an important role in dispute resolution at
the local level outside the court system. By the end of this lesson students will
have examined the Philippine government system and be able to identify its
unique characteristics. Information contained in this module include a
summary of the Philippine government system from the national level to the
local level, a series of student reading questions, several images related the
barangay system, and links to additional readings and resources.

Philippine Local Government Units:

While the Philippines is divided into 18 regions, these regions do not
necessarily represent political or administrative units below the national
government. Local government units are sub-divided into provinces or highly
urbanized cities, such as the city of Manila, which is not a part of a province
but its own separate political unit, and then further sub-divided into
municipalities and barangays. The barangay is the smallest administrative or
local government unit in a province or independent city. Like the American
federal system, each local government unit is sovereign and has its own rights,
responsibilities, and duties, but each local unit is also subservient to the
respective higher governmental authority. In the case of the Philippines, the
barangay is under municipalities, which is under the province, which is under
the federal government (See Appendix 3 – The Structure of Local Governments
in the Philippines). Each local government unit has the right to exist and its
boundaries cannot be altered without a plebiscite by the political unit’s
population. The 1987 Philippine Constitution limits local office holders to three
year terms and not more than three consecutive terms. Each local unit of
government will participate in elections to select the local government officials.
Each local government unit has the right to generate revenue to be used
exclusively by that respective political unit. Each highly urbanized city must
have a population of at least 200,000 and each province a population of at
least 250,000. Each barangay must have at least 2,000 inhabitants. In large
metropolitan areas, such as Manila, each barangay must have at least 5,000
inhabitants (See Appendix 4 – Criteria for Local Government Unit Creation
According to the 1991 Local Government Code).

The Barangay Local Government Unit:

Barangays, the smallest local government unit, developed in the Philippines
well before the Spanish colonial era. The first barangay developed around
groups of 30-100 households with most limited to kinship principles. While
some barangay did organize into larger political units, such as the Islamic
Sultanates in Sulu, most remained small and decentralized. The arrival of
Spanish colonialism in the 1500s resulted in a more centralized governing
system. The Spanish retained the barangay, but created a hierarchy around
municipalities, cities, and provinces. Thus, we see the outline of the present
local government units. Despite the creation of these different levels the
Spanish retained ultimate authority over the various units. Control within the
barangays was facilitated by a patron-client relationship between the Spanish
and local barangay headmen and local chiefs. The Americans essential kept the
Spanish bureaucratic structure in place with their arrival in 1898. While some
local government units had some autonomy to elect local officials, the laws
created by these local units were enforced at the national level. The Philippine
Constitution of 1935 created a strong unitary system of government with the
president controlling local government. The post-independence period after
WWII witnessed a gradual decentralization of power and the slow return of
authority to local governments. During the martial law period under Ferdinand
Marcos (1972-1986), however, this authority was used at the barangay level as
a means to extend martial law power down to the local levels (Atienza’, 2006).
The current local government and barangay system in the Philippines is the
result of the 1986 People Power Revolution that removed Marcos from power
and the subsequent 1987 Constitution. The new Constitution codified the
existence of the local government units, including the barangay system, and
granted each unit a level of autonomy.

The 1991 law was revolutionary in that it ran counter to the tradition of
centralization in most Southeast Asian nations (Atienza’, 2006). Atienza’ (2006)
notes that this devolution was important in the Philippines for five reasons: 1)
it gave local governments control over many of the basic social services, such
as health and agriculture; 2) it gave local governments enforcement power over
many laws and regulations, including environmental laws and food inspection;
3) it gave local government the authority to tax and increased the share of
funding from the national government to the local barangay; 4) it enhanced
local civil society by allowing local political units the ability to create locally
elected governing assemblies, including at the barangay level, to govern over
the local population and the ability of the population to vote on local
referendum; and 5) it encourages local governments to form partnerships with
the private sector to promote local development. Today, the barangay is the
smallest unit of government in the Philippines. Each barangay is headed by a
barangay captain and barangay assembly, each elected by the citizens of the
barangay. Consisting of nine members, the barangay assembly is composed of
seven council members plus the barangay captain and the chairperson of the
local barangay Youth Council. Barangays are responsible for governing and
managing the population and territory within their respective borders. Like a
city council in the United States, the barangay assembly and captain meet in
regular public forums to discuss and debate local issues and laws. Their
activities can include allocating funding for roads and infrastructure projects,
formalizing funding requests to the higher municipal or province governments,
creating the barangay budget, setting local curfews, to organizing and
sponsoring community and cultural activities. Barangays are also important
because they offer Filipinos a system of alternative justice and dispute
resolution to the formal Philippine court system. The Barangay Justice System,
or the Katarungang Pambarangay, relies on the Philippine traditional
community method of dispute resolution. The goal is to have the community
elders and leadership mediate a mutually acceptable resolution between two
disputing parties. A claimant can file a complaint with the barangay, which is
then addressed by the barangay captain. If the captain fails to resolve the
dispute, mutually agreed upon third parties can be brought into the process. If
the parties continue to fail in the resolution process, then the parties may
choose to enter the court system. The advantage of the barangay justice system
is that it is intended to create a win-win solution and it can be quicker and less
costly than the court system (Access, 2013).

REFERRENCES:
https://www.investopedia.com/terms/e/economics.asp
https://www.officialgazette.gov.ph/about/gov/
https://www.niu.edu/clas/cseas/_pdf/lesson-plans/fulbright-hays/
philippine-political-structure.pdf