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IN PARTIAL FULFILLMENT of the REQUIREMENTS in ECONOMICS 101 (Laws of Economics, Taxation and Agrarian Reform)

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IN PARTIAL FULFILLMENT of the REQUIREMENTS in ECONOMICS 101 (Laws of Economics, Taxation and Agrarian Reform) IN PARTIAL FULFILLMENT OF THE REQUIREMENTS IN ECONOMICS 101 (Laws of Economics, Taxation and Agrarian Reform) Submitted to: Prof. Bernard Suriaga Submitted by: Jaycee Joe Reineger F. Limen BEED III-A PHILIPPINE ECONOMY: THE DECLINE OF THE PHILIPPINE PESO INTRODUCTION Devaluation is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. (Wikipedia) Devaluation is an integral part of adjustment in many developing countries, particularly relied upon by countries facing large external imbalances. Devaluation can only reduce trade imbalances if it translates to a real devaluation and if trade flows respond to relative prices in a significant and predictable manner. (Reinhart, Carmen 1995) Devaluation refers to the declination in the value of a currency in relation to another which is normally being brought by the actions of a central bank or monetary authority. Sometimes the word” Devaluation” is used more generally to describe any significant drop in a currency’s international exchange rate, but usually a decline caused by market forces where sometimes government has no intervention and is termed as depreciation. Devaluations are most often associated with developing countries like the countries in Asia that don’t allow their currency price to float freely on the open market. Currency devaluation can take two forms. It can either be the natural result of market forces, or it can be the result of government intervention. In the first scenario, the global market changes its opinion about the stability, value or future of a currency and decides that it is willing to pay less. In the second scenario, a nation's government fixes the relative price of their currency below its present level and prohibits currency exchange at any other rate. (Joshua Curtiss) In order to achieve a more desirable balance of trade, Currency Devaluation can be a help. Currency devaluation will reduce the price of their products abroad and increase the price of foreign products in domestic markets for nations which is experiencing a trade deficit or when imports exceed exports. Lowering of prices can mean more jobs and lower unemployment rates at home when the demand is increased for products in other countries. PHILIPPINE PESO The Philippines or the Republic of the Philippines is a Southeast Asian Country and is considered as an archipelago of 7,107 islands located in the western Pacific Ocean. The capital city of the Philippines is Manila. The Philippines can be divided into three parts, namely, Luzon, Visayas, and Mindanao; with all these islands combined, the country’s coastline is the fifth longest in the world, spanning 36,289 kilometers. It is considered as Asia’s largest Catholic country of Asia, since Spanish colonial times and is the world’s 12th most populated country with approximately 101,833,938 (2011). Philippines economy is the world’s 47th largest economy (as of 2008). Peso is the unit of currency (Filipino: piso) (sign: ₱; code: PHP) is being used. The Philippine peso is subdivided into 100 centavos, Spanish or sentimo in Filipino. In 1967, the languages used on the banknotes and coins were English so the term peso was the name used. After that, the language was then changed to Pilipino or the name of the Filipino language and so the currency as written on the banknotes and coins is piso. Bangko Sentral ng Pilipinas or Central Bank of the Philippines are the one issuing the banknotes of the Philippines and in charge of the circulation. The 20 peso bill is the smallest amount of legal tender in the circulation and 1,000 peso bill is the largest. The front side of each banknote features prominent people in the country's history while the reverse side depicts landmarks and events in history. The front side of each banknote features prominent people in the country's history while the reverse side depicts landmarks and events in history, the 5 and 10 peso bills have not been demonetized and concurrently offered in coins in recent years. The peso is usually denoted by the symbol "₱", this symbol was added to the Unicode standard in version 3.2 and is assigned U+20B1 (₱). The symbol can be accessed through some word processors by typing in "20b1" and then pressing the Alt and X buttons simultaneously. Other ways of writing the Philippine Peso sign are "PHP", "PhP", "P", or "P" (strike-through or double-strike-through uppercase P), which is still the most common method, however font support for the Unicode Peso sign has been around for some time (Wikipedia). PHILIPPINE ECONOMY The economy of the Philippines is always changing, sometimes the economy is high, and sometimes the economy is low. In 2010 The Philippine economy grew at its fastest pace at a rate of 7.3% that has surpassed the government’s target of 5.0% to 6.0% and jumped up from growth of just 0.9% in 2009, the Philippines seeks to attract more foreign investment and enable the long underperforming economy to catch up with its fast-developing Asian neighbors, said analysts. The Philippine Star on January 10, 2011, reported that investment is expected to hit P610.4 billion by 2014 (2010 posted a P505 billion investment) according to the Board of Investments (BOI)'s managing head Cristino L. Panlilio and the Philippine Economic Zone Authority (PEZA). The BOI said that they were hoping that investments from the public private partnership (PPP) will boost the figure. Philippines’ GDP grew 7.3% in 2010 due to spurred by consumer demand, a rebound in exports and investments, and election-related spending. The economy weathered in global recession due to minimal exposure to troubled international securities, lower dependence on exports, relatively resilient domestic consumption, large remittances from four- to five-million overseas Filipino workers, and a growing business process outsourcing industry. The average rate during Arroyo’s administration is 4.5% economy growth in the country. Despite of the economy growth, the rate of poverty was worsened, because of a high population growth rate and inequitable distribution of income. For Aquino’s administration, they are working to reduce the government deficit from 3.9% of GDP, when it took office, to 2% of GDP by 2013. In financing the deficits the government has had little difficulty issuing debt both locally and internationally. President Aquino emphasizes the first budget to education, health, conditional cash transfers for the poor, and other social spending programs, relying on the private sector to finance important infrastructure projects. The AQUINO administration has vowed to focus on improving tax collection efficiency - rather than imposing new taxes - as a part of its good governance platform, whereby weak tax collection has limited the government's ability to address major challenges. According to CIA World Factbook: GDP (purchasing power parity) GDP - real growth rate $351.4 billion (2010 est.) 7.3% (2010 est.) $327.4 billion (2009 est.) 1.1% (2009 est.) $323.9 billion (2008 est.) 3.7% (2008 est.) GDP - per capita (PPP) GDP - composition by sector $3,500 (2010 est.) Agriculture: 12.3% $3,300 (2009 est.) Industry: 32.6% $3,400 (2008 est.) Services: 55.1% (2010 est.) Population below poverty line Unemployment rate 32.9% (2006 est.) 7.3% (2010 est.) Labor force 7.5% (2009 est.) 38.9 million (2010 est.) Unemployment, youth ages 15-24 Labor force - by occupation total: 17.4% Agriculture: 33% male: 16.2% Industry: 15% female: 19.3% (2009) Services: 52% (2010 est.) Household income or consumption by percentage share Lowest 10%: 2.4% Highest 10%: 31.2% (2006) Distribution of family income - Gini index Budget surplus (+) or deficit (-) 45.8 (2006) -3.7% of GDP (2010 est.) 46.6 (2003) Inflation rate (consumer prices) Investment (gross fixed) 3.8% (2010 est.) 20.2% of GDP (2010 est.) 4.2% (2009 est.) Budget Public debt Revenues: $26.78 billion 52.4% of GDP (2010 est.) Expenditures: $33.75 billion (2010 est.) 54.8% of GDP (2009 est.) Taxes and other revenues 14.2% of GDP (2010 est.) This means that there is no constant increase or decrease in terms of the GDP or Gross Domestic Product and other rates thereof. GDP or gross domestic product (GDP) is similar to its gross national product (GNP), except that GDP excludes net income from foreign sources. It is a measure of the value of a country’s production of goods and services for a specific period as show above that is usually one year. In general, economic policy makers look to the size and growth of the GNP or GDP as an indication of the well-being of the country's economy. GDP or Gross Domestic Product is a measure of all the services and products made domestically or the services/product measures in once country. The components of GDP are therefore the sectors of an economy which include consumer spending in their daily living, industry investment of investors like in shoe-making, can goods, differential for imports and exports, and government spending for the development of the country. GNP can be measured in at least two different ways, both of which yield the same result. One way of measuring the Gross National Product is from the buyer's point of view. Also known as the expenditure approach to measuring GNP, this method calculates the value of the GNP as the sum of the four components of GNP expenditures: consumption of the people, investment for industries or big businesses, government purchases for the development of the country, and net exports to different countries. The economic theory of purchasing power parity attempts to refine the true value of currency.
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