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How 2022 GDP Growth Affects Philippine Economy 2023
January 30, 2023 by Brianna Yparraguirre
Good news for Filipino households as the 2022 GDP Growth delivers an optimistic influence on the Economic Projection for the year 2023. In a nutshell, Diokno's analysis of the Philippine economy's performance last 2022 probably expanded far more quickly than the government's target of 6.5% to 7.5%, and this year, it is predicted to expand by around 6.5%.
Before tackling how the Gross Domestic Product Growth of the year 2022 will affect the Philippine Economy for 2023. It is crucial to elaborate and expound knowledge or familiarity with the GDP and all its relations, including a house and lot for sale.
What is the Gross Domestic Product?
The market value of all the finished goods and services produced within a country during a year is known as the gross domestic product (GDP). Gdp is a crucial gauge of the economy's overall health. Every item or service that was purchased will be added until the summation of all lists of goods and services is totaled at the end of the year. A finished good or service that has been completed cannot be sold separately from another item. The gross domestic product only counts production. The GDP measures the monetary value of the final goods and services—those purchased by the consumer—produced in a nation during a specific time period (say a quarter or a year).
The GDP can be classified into nominal GDP and real GDP. Gaining a deeper grasp of the global economy requires knowing how both are computed and applied. The nominal gross domestic product is classified as the value of all finished goods and services produced within a nation's boundaries, valued at current market prices, meanwhile, the real gross domestic product is the measurement of a nation's output with the value of its own net exports, investments, finished goods and services sold, as well as their government's expenditures.
How is GDP calculated?
The equation to acquire the Gross Domestic Product can be measured by adding all of the country's consumption, investment, government, and net export. (GDP= C+I+G+NX)
It is another term for "consumer spending". It is the cash that consumers spend on material possessions like laptop purchases and on services like hotel reservations.
Investments make up the second component of the GDP equation. This gauges how much money companies spend on items like machinery, real estate, and buildings. A significant consumer investment is the purchase of a home.
Investment can suffer when the economy is struggling, particularly during a financial crisis. During a recession, companies attempt to save costs rather than use the money for investments like factories or machinery.
The money spent by the government goes toward expenditures like infrastructure, education, calamity fund for natural disasters, and the military. It is also the money that was spent during the acquisition of Covid vaccine to ensure the health and well-being of the country's citizens.
Lastly, net exports are the difference between a country's exports and imports.
The data on consumption, investment, government spending, and net exports are gathered by countries all around the world. As a result, GDP becomes a benchmark by which nations can compare themselves.
The GDP growth rate is the gross domestic product's continuous percentage change over time. If the economic activity is healthy, hence the GDP growth expands. Meanwhile, when the economic performance is in a bad shape, then the GDP growth contracts.
Moreover, The gross domestic product (GDP) is calculated using the income approach as the total revenue from the domestic production of goods and services. It is one of the three distinct but comparable methods of estimating GDP is the income approach.
Difference between Gross Domestic Product and Gross National Product
photo from: https://www.thebalancemoney.com/
Gross domestic product is the value of all economic activity in a geographic area. Gross national product is the value of all economic activity by a country represented by its flag regardless of its business operation regardless of its area of operation whether within its local premises or even internationally. For example, Apple as an American company, all sales would take into account all the places it operates around the world. Whenever Apple operates in China, the Philippines, Canada, or even Spain, it's all counted in the Gross National Product of the United States of America. The other term for Gross National Product is Gross National Income.
As mentioned, the Gross Domestic Product is the value of all finished goods and services which was made within the country. The Gross National Income, on the other hand, is the value of all the products and services which were produced by the countrymen of a certain country. For example, the income of Filipinos working outside the Philippine premises is included in the calculation of the Gross National Income since they are still citizens of the aforementioned country. Only all finished goods are determined when calculating the GNI and GDP. And the intermediary goods or raw materials are not calculated. For example, the income of Filipinos working jobs outside the Philippine premises is included in the calculation of the Gross National Income since they are still citizens of the aforementioned country. However, if a foreigner worked inside the Philippine premises, then their income is calculated in GDP since they garnered work within the country. The income of Filipino workers in the Philippines is included in the computation of both GNI and GDP. Moreover, the income garnered by low-income families from sidewalk vendors is not included in the computation (underground economy).
Growth of the Philippine Economy
In general, higher demand results in higher production and a faster rate of economic growth. An increase in economic development is typically viewed favorably. A country is formally in a recession if it experiences negative growth rates for two consecutive quarters. Said, if an economy contracts by 2% from the previous year, the income of the population as a whole decreases by 2% during that year.
According to Finance Secretary Benjamin Diokno's economic analysis, the Philippine economy likely grew far faster than the government's aim of 6.5% to 7.5% last year and is anticipated to grow by about 6.5% this year due to a robust industrial sector, a healthy banking system, and record-low unemployment. The country's economy is leading towards an optimistic projection. The year 2022 experienced spur economic growth which led to more jobs for local citizens. The labor force underwent a recovery for the past 2 years due to the economic shutdown which was influenced by the pandemic. Businesses had to stop operations for safety measures. Unfortunately, most businesses were officially canceled due to the drastic impact on the economy last 2020. Although most countries all over the world suffered during the peak of the Covid surge, the second quarter of the year 2021 was the first stage in seeing signs of a fast recovery and spur growth when the government successfully controlled the virus with the international distribution of the Covid Vaccine.
The opening of travel borders in most countries and lifting the mandatory wearing of masks in public spaces had a major contribution to the fast recovery of today's economy. Foreign exports of goods became available again without restrictions. Many businesses went back to regular operations with safety precautions. Hence, more workers and more money transactions became available again.
What can be expected with the 2023 economy?
Since the year 2022's GDP growth performance experienced an upward trend. Eventually, it is a good influence on the economic performance of 2023.
As the Covid 19 surge continually transitions as an endemic and its threat diminished, It is expected that more job opportunities will be anticipated for 2023 which will help lower prices for afflicted items over the course of the year. However, the ongoing war between neighboring countries, Ukraine, and Russia affect the markets for energy and other industrial commodities. Although it may be assumed that the tension would not escalate immediately, experts projected that a cease-fire could be met until at least the beginning of the summer season of 2023.
According to the forecast of the World Bank, The global economy is predicted to escalate by at least 1.7% for the year 2023 and approximately 2.7% growth rate for the year 2024. The higher growth rate is good news for investors since the stock prices would be favorable for investment opportunities.
GDP growth rate for Real Estate
Financial planning is a crucial engagement to secure an individual's welfare. Achieving financial freedom is everyone's desire. In this day and age, many people are aiming to retire early and secure funds with their retirement. Moreover, it is becoming a piece of common knowledge in every household that no one is getting richer just by working 8 hours a day. Many are jumping on the bandwagon and attempting with the availability of their time to at least execute extra jobs or side hustles. However, passive income delivers a more sealed and less effort financial security.
Filipino households were flabbergasted by the notorious inflation peak last 2022. Despite the threatening effect of inflation, the investment growth rate is promising. Every experienced financial professional highly encourages to allocate private investment opportunities through real estate. The higher growth is an excellent chance to start real estate investments to achieve financial security during high inflation.
Real estate values decline as the GDP growth rate rises and vice versa.
Despite the demanding high-interest rates, investing in real estate is the greatest combat amidst inflation. Moreover, real estate investment is the safest yet most effective investment plan during inflation. The co-integration of GDP growth and real estate capital returns makes sense for residential real estate because money must be saved up in order to buy a property. GDP can be used to directly calculate income with only a few minor adjustments.
The year 2023 is auspicious ever since the travel restrictions has been lifted. Traveling and touring becomes more attainable. Foreign travelers can give a higher growth with Philippine tourism which can contribute to increased performance of the Philippine Economy. With this, real estate investors have to take advantage of this opportunity and turn it into a passive income chance. Ready-to-rent units are trendy nowadays, many renters convert their purchased units as Airbnb's to accommodate tourists. Moreover, investing in an attractive location is crucial to attaining a return of investment with real estate. Tagaytay is one of the most promising provinces in the Philippines. Tagaytay is also classified as the summer capital of the Philippines alongside Baguio. But comparing the two, Tagaytay is more accessible and less crowded. With its cool climate and serene environment, many tourists will definitely go back to Tagaytay. Moreover, Tagaytay is the home of the smallest volcano in the world, Taal Volcano. The landscape is captivating and crowded with tourists. Hence, real estate opportunity in Tagaytay is the most effective. Crown Asia features Pinevale located in the aforementioned province. The unit is accessible to the serene environment and mountain ridges in Tagaytay. Tourists will definitely enjoy their stay. Moreover, the unit features smart home technology for the guests' convenience. This improvement sure caters to foreign tourists. The smart home system will connect through voice command which can aid the guests with opening doors, using showers, adjusting lights, as well as playing music. The television can also be turned on and change the channel with the smart home system. Moreover, appliances can also be controlled by syncing the smart home system with smartphones. The best flex of Pinevale condominium is its tight home security due to the influence of smart home system. So when the tourist is out exploring the beauty of Tagaytay, their mind is at ease that their valuables are safe inside the unit. They do not have to carry a key and worry about misplacing the key to their house and lot for sale since the home security is voice-activated or fingerprint activated.
With the growth rate which leads to an optimistic projection, real estate investment is guaranteed to be a good passive income this 2023.
Related Blog: Philippine GDP Growth: What Does It Mean for Your Investments