The and It's 21 Century: Philippine Economy Socioeconomic Challenges

The Philippine
Economy and
It’s 21 Century
st
Socioeconomic
Challenges
Objectives
1. Identify the different economic systems;
2. Explain the 3 primary macroeconomics goals of
a country;
3. Explain how applied economics can be used to
solve the country’s economic problems; and
4. Understand the opportunities and challenges
given the country’s current economic state.
2
Economic System
› It refers to the different ways of
managing a nation’s available resources
to answer the 3 economic questions.
(what to produce, how to produce and
for whom to produce)
3
Types of Economic System
1. Free market economy
2. Centralized economy
3. Mixed economy
4. Traditional economy
4
Free market economy
› It is a system characterized by
competition and high level of private
ownership.
› Prices are set by the interaction of
buyers and sellers in the market
› Resources are allocated freely
› i.e Laissez faire system
5
Centralized (command) economy
› This system is characterized by the heavy
involvement of the government in managing
the economy
› The method of central planning is
employed where the government plans,
directs on how resources will be
allocated.
6
Mixed economy
 Free market forces and central planning
together determine what to produce, how to
produce, and for whom to produce.
 Government intervention includes the power
to impose taxes, set trade limits and
restrictions, and implement legislations. In
addition to oversight functions, the
government can implement policies to promote
business and at the same time can impose
sanctions to penalize industries. In return, the
government provides services to the public. 7
Traditional economy
› This is characterized by customs and
habits.
› Barter is a mechanism where goods are
exchanged for another good.
8
Economic question
What? How? For Whom?

Free market Determined by Determined by Determined by
consumer producers consumer
choices purchasing power
Centralized Determined by Determined by Determined by

the government the government the government
Mixed Influenced by Influenced by Influenced by all

both consumers both producers sectors of the
and the and the economy
government government
9
½ sheet of paper
› Differentiate the types of

economic system by relating how
the fundamental economic
questions are addressed by each
type.
10
Macroeconomic
Goals of a country
Economic growth
› It is typically measured through GDP
or by economy’s output. Period
› GDP – is defined as the value of all

final goods and services that we are
consumed at a given
12
Business Cycle
› is characterized by the upward and

downward trend of the GDP observed over a
period of time, usually years.
› Recession – typically a series of decline GDP
› Peak – highest point following an expansion
› Trough – lowest point following a recession
› The upward trend in GDP after a trough is
sometimes referred to as economic recovery.
13
Recession
› It is a period of economic downward
characterized by high or increased
unemployment, slow business, and a
decline in consumer purchases, among
others.
14
Expansion
› It features low or decreased
unemployment, increased production,
and a rise in consumer spending driven
by higher income.
15
Depression
› A prolonged period of recession
› Economic growth is also illustrated

through the production possibility
frontier (PPF)
16
Full employment
› Defined as zero cyclical unemployment
› The economy slows down during

recession and is characterized by
generally low business and consumer
activities.
17
Price stability
› Is formally the absence of prolonged inflation
and deflation.
› Inflation – continued price increase that leads
high inflation has negative consequences
› Deflation – it contracts the money supply and
limits liquidity
› People tend to hold on to their money and
liquidate assets that are losing value fast
due to deflation.
18
Price stability
› It is a primary stability of the central
bank to maintain inflation at a
reasonable level without hindering
economic activities that spur growth.
19
The Philippines’
21st Century
Socioeconomic
Challenges
The Philippines’ 21st Century
Socioeconomic Challenges
› Globalization brings countless advantages to

developing countries such as the Philippines,
primarily in the sector of trade in the form of
less trade barriers and preferential trade
agreements.
21
The Philippines’ 21st Century
Socioeconomic Challenges
1. Global Challenges
a) War and Terrorism in the Middle East
b) Political Instability in Europe
2. Domestic Issues
a) Territorial Dispute with China
b) The Ongoing War in Mindanao
22
1. Global challenges
 The continuous integration across the
world means that the Philippines is
vulnerable to major international issues.
 21st century global challenges such as
war, terrorism, and political instability in
other regions, can impact the country
primarily in areas of the trade and
financial markets.
23
a. War and Terrorism in the Middle East
› Terrorist attacks and continued security
threats bring with them enormous costs to
the global economy.
› There is loss from disruptions in business
activities and damage to properties.
› Indirectly and due to the interdependency
of economies across the world, terrorist
activities also affect other nations and not
just those that are under terrorist attacks.
24
b. Political Instability in Europe
› Britain’s move to leave the EU (Brexit)
expectedly caused shocks in the global
market.
› Declines in stocks in the whole financial
market immediately following the vote,
increased business and investment
uncertainty, and a slowdown of Great Britain’s
economy as expected short-term effects of
the referendum.
25
2. Domestic issues
› Challenges threaten the country’s
national security and potentially impede
economic growth.
26
a. Territorial Dispute with China
› The Philippines has an ongoing maritime

dispute with China over the West
Philippine Sea, which banned Filipino
Fishermen.
27
b. The Ongoing War in Mindanao
› The war between the government and
the Moro Islamic Front (MILF) that
started in the 1970’s has been ongoing
for over 40 years and across 6
administrations.
28

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The Philippine

What? How? For Whom?

Centralized Determined by Determined by Determined by

Mixed Influenced by Influenced by Influenced by all

› Differentiate the types of

› GDP – is defined as the value of all

› is characterized by the upward and

› Economic growth is also illustrated

› The economy slows down during

› Globalization brings countless advantages to

› The Philippines has an ongoing maritime

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