Our Lady of Fatima University

Dela Paz Norte, City of San Fernando, Pampanga

College of Business and Accountancy

Introduction to Macroeconomics
BSBA 2Y2-1 ECON 2

Submitted to:

Arturo Bautista
Professor

Submitted by:
Arellano, Dafhnie

Date of Submission
March 22, 2019
Table of Contents

Introduction .................................................................................................................................................. 1
Economic Development, Economic Growth, Poverty Alleviation ................................................................... 2
Philippines ..................................................................................................................................................... 3
Canada .................................................................................................................................................. 4
Afghanistan ...................................................................................................................................... 5
Conclusion .................................................................................................................................................... 7
Recommendation .......................................................................................................................................... 8
Reference ...................................................................................................................................................... 9
Introduction

The debate on the relationship between poverty, inequality and economic growth is characterized by
confusion and strong, polarized positions. Some consider economic growth to be the key for the
reduction of poverty, while others argue that it tends to lead to marginalization and greater inequality
and poverty. Economic growth is the most powerful instrument for reducing poverty and improving the
quality of life in developing countries. Both cross-country research and country case studies provide
overwhelming evidence that rapid and sustained growth is critical to making faster progress towards the
Millennium Development Goals – and not just the first goal of halving the global proportion of people
living on less a day.

Growth can generate virtuous circles of prosperity and opportunity. Strong growth and employment
opportunities improve incentives for parents to invest in their children’s education by sending them to
school. This may lead to the emergence of a strong and growing group of entrepreneurs, which should
generate pressure for improved governance. Strong economic growth therefore advances human
development, which, in turn, promotes economic growth.

But under different conditions, similar rates of growth can have very different effects on poverty, the
employment prospects of the poor and broader indicators of human development. The extent to which
growth reduces poverty depends on the degree to which the poor participate in the growth process and
share in its proceeds. Thus, both the pace and pattern of growth matter for reducing poverty.

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Economic Development
Progress in an economy, or the qualitative measure of this. Economic development usually refers to the
adoption of new technologies, transition from agriculture-based to industry-based economy, and general
improvement in living standards.

Poverty Alleviation
Poverty alleviation aims to improve the quality of life for those people currently living in poverty. Another
term that is often used is poverty reduction.

Economic Growth
Economic growth is an increase in the production of goods and services over a specific period. To be most
accurate, the measurement must remove the effects of inflation.

Economic growth creates more profit for businesses. As a result, stock prices rise. That gives companies
capital to invest and hire more employees. As more jobs are created, incomes rise. Consumers have more
money to buy additional products and services. Purchases drive higher economic growth. For this reason,
all countries want positive economic growth. This makes economic growth the most watched economic
indicator.

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PHILIPPINES

Economic Growth
The Philippines GDP advanced 1.6 percent quarter-on-quarter in the three months to December
of 2018, after an upwardly revised 1.5 percent growth in the previous quarter. It was the
strongest quarterly growth rate since the third quarter 2017, mainly boosted by the industry
sector and agriculture, hunting, forestry and fishing. GDP Growth Rate in Philippines averaged
1.25 percent from 1998 until 2018, reaching an all-time high of 3.40 percent in the first quarter
of 2010 and a record low of -2.30 percent in the first quarter of 2009.

Economic Development

The economy has been relatively resilient to global economic shocks due to less exposure to
troubled international securities, lower dependence on exports, relatively resilient domestic
consumption, large remittances from about 10 million overseas Filipino workers and migrants,
and a rapidly expanding services industry. During 2017, the current account balance fell into the
negative range, the first time since the 2008 global financial crisis, in part due to an ambitious
new infrastructure spending program announced this year. However, international reserves
remain at comfortable levels and the banking system is stable.

Efforts to improve tax administration and expenditures management have helped ease the
Philippines' debt burden and tight fiscal situation. The Philippines received investment-grade
credit ratings on its sovereign debt under the former AQUINO administration and has had little
difficulty financing its budget deficits. However, weak absorptive capacity and implementation
bottlenecks have prevented the government from maximizing its expenditure plans. Although it
has improved, the low tax-to-GDP ratio remains a constraint to supporting increasingly higher
spending levels and sustaining high and inclusive growth over the longer term.

Poverty Alleviation
Success in reducing inequality and poverty in the Philippines and other East Asian countries
hinges on providing the poor and the vulnerable with equal access to economic opportunities
and basic services such as health and education, according to the National Economic and
Development Authority (NEDA).

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CANADA

Economic Growth
The Gross Domestic Product (GDP) in Canada expanded 1.60 percent in the fourth quarter of
2018 over the same quarter of the previous year. GDP Annual Growth Rate in Canada averaged
3.15 percent from 1962 until 2018, reaching an all-time high of 9.30 percent in the first quarter
of 1962 and a record low of -4.10 percent in the fourth quarter of 1982.

Economic Development
The Canadian economy advanced 0.1 percent quarter-on-quarter in the fourth quarter of 2018,
slowing from a 0.5 percent expansion in the previous period. It was the weakest growth rate
since the second quarter of 2016, as real gross national income fell, largely owing to lower
export prices of crude oil and crude bitumen and final domestic demand shrank. Expressed as an
annualized rate, the GDP expanded 0.4 percent, following a 2 percent gain in the third quarter
and well below market expectations of 1.2 percent. Considering full 2018, the economy grew 1.8
percent easing from a 3.0 percent in 2017. GDP Growth Rate in Canada averaged 0.78 percent
from 1961 until 2018, reaching an all-time high of 3.10 percent in the fourth quarter of 1963 and
a record low of -2.30 percent in the first quarter of 2009.

Poverty Alleviation

The causes of poverty in Canada, according to a set of six-year studies by Canada’s Survey of
Labor and Income Dynamics (SLID), stem from being in a “high-risk” group. The Canadian
government’s 2015 socioeconomic database states that 5,956,320 Canadians are low-income,
with a median family income of $15,880. For most Canadians, being low income is a non-
permanent state. The SLID found that 36.9 percent of Canadians who fell below the low-income
cutoff bracket were out the following year. SLID reported that between 2005 and 2010, only 1.5
percent of Canadians were stagnant in the low-income bracket, with an average interval of low
income of 2.4 years. The overall data that SLID reported seemed to suggest the causes of
poverty in Canada are usually temporary, such as loss of a job or a decrease in wage, and that
Canadians who were experiencing poverty would recover.

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AFGHANISTAN
Economic Growth

Economic growth: the rate of change of real GDP

For that indicator, The World Bank provides data for Afghanistan from 2003 to 2017. The
average value for Afghanistan during that period was 7.21 percent with a minimum of 0.43
percent in 2011 and a maximum of 21.39 percent in 2009. See the global rankings for that
indicator or use the country comparator to compare trends over time.
Economic Development

The economy of Afghanistan has had significant improvement in the last decade due to the
infusion of billions of dollars in international assistance and remittances from Afghan expatriates.
The assistance that came from expatriates and outside investors saw this increase when there
was more political reliability after the fall of the Taliban regime.[7] The nation's GDP stands at
about $64.08 billion with an exchange rate of $18.4 billion (2014), and the GDP per capita is
about $2,000. It imports over $6 billion worth of goods but exports only $658 million,
mainly gold, opium, fruits and nuts.[8][6]
Despite holding over $1 trillion in proven untapped mineral deposits, Afghanistan remains one of
the least developed countries on the planet. About 35% of its population is unemployed or lives
below the poverty line.[9] Many of the unemployed men join the foreign-funded militant
groups or the world of crime, particularly as smugglers. The Afghan government has long been
pleading for foreign investment in order to grow and stabilize its economy.

Poverty Alleviation
According to the latest Afghanistan Poverty Status Update, which was jointly produced by the
Government of the Islamic Republic of Afghanistan’s Ministry of Economy and the World Bank
and uses the National Risk and Vulnerability Assessment (NRVA) data, 36% of Afghans remained
poor in 2007-08 and in 2012, meaning that more than one in three Afghans did not have enough
money to buy food or cover their basic needs. This is despite an annual GDP growth rate of 6.9%
during that same period.

The report, which analyzes the factors behind Afghanistan’s poverty rate and provides a
roadmap for poverty reduction, also finds that patterns of growth in Afghanistan widened the
gap between the rich and the poor. The poorest 20% of the population experienced a 2% decline
in real per capita expenditure while the richest 20% saw a 9% increase. Widening inequalities
were further reflected in an increase of the Gini index, which moved from 29.7% in 2007-8 to
31.6% in 2011-12.

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Additional findings include:

Poverty in Afghanistan is concentrated in rural areas. Four out of five poor people live in rural
areas. The East, Northeast, and West-Central regions—where almost half of the inhabitants are
poor—have the lowest per capita consumption and highest likelihood of poverty.

Lack of education, livelihoods and access to basic services contribute to Afghan poverty. 75.6% of
poor people are illiterate. Poor people face higher unemployment (8%) and under employment
(41%) and are more likely to work in agriculture (43.6%) or in the informal sector (84.3%). Poor
people are also less likely to have access to electricity (63.8 %), safe drinking water (40.3%), and
sanitation (2.8%).

Poor people are more vulnerable but less equipped to cope with natural and manmade shocks.
84% of Afghan households experienced at least one economic shock in 2011-12 and 53%
suffered from three or more shocks.
9=]
International spending helped grow the economy, but it hasn’t equally benefited all sectors or
the poorest. International spending created jobs in the public, health and education services
sectors and benefited high-conflict areas the most. It didn’t raise productivity in the agriculture
sector, which employs most of Afghanistan’s poor people.

International aid-supported public investment helped improve human development outcomes.

Youth literacy improved by 8%, primary school enrolment grew by 6% and access to electricity,
improved sanitation and safe drinking water grew by approximately 14%.

To reduce poverty, Afghanistan must focus on strengthening agriculture, investing in human

development and managing and mitigating risks that increase poor people's vulnerability.

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Conclusion

“To what extent does economic growth reduce poverty in the low-income countries of the
world?” The basic finding is that economic growth represents an important means for
reducing poverty in the developing world. This finding is robust for the two definitions
of growth used in this study. When economic growth is measured by survey mean
income (consumption), there is a strong, statistical link between growth and poverty
reduction. When economic growth is measured by GDP per capita, the statistical
relationship between growth and poverty reduction is still present, albeit not quite as
strong.
Why is economic growth so important in reducing poverty? The answer to this
question has been broached at several points in this analysis. Economic growth reduces
poverty because first and foremost growth has little impact on income inequality. Income
distributions do not generally change much over time. Analysis of the 50 countries and
the 101 intervals included in the data set shows that income inequality rises on average
less than 1.0 percent per year. Moreover, econometric analysis shows that economic
growth has no statistical effect on income distribution: inequality may rise, fall or remain
steady with growth.

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Recommendation

Considering the changing nature of the global economy, driven by technological advancements
and globalization, it is now more important than ever to invest in human capital and ensure that
everyone has the skills necessary to succeed. According to recent estimates, up to 2 billion of
today’s jobs are at risk of being replaced by automation by 2030.
The UNESCO Global Education Monitoring Report and the Education Commission’s Learning
Generation Report provide important evidence on the impact of education on individual’s
earnings and economic growth. Below are some of the most compelling data that illustrate these
links.
1.Education reduces poverty
• 171 million people could be lifted out of extreme poverty if all children left school with basic
reading skills. That’s equivalent to a 12% drop in the world total.
• Absolute poverty could be reduced by 30% from learning improvements outlined by the
Education Commission.

2.Education increases individual earnings

• Education increases earnings by roughly 10% per each additional year of schooling.

3.Education promotes economic growth

• Educational attainment explains about half of the difference in growth rates between East Asia
and Sub-Saharan Africa between 1965 and 2010.
• In 2050, GDP per capita in low-income countries would be almost 70% lower than it would be if
all children were learning.
• Increasing tertiary attainment by one year on average would increase sub-Saharan Africa’s
long-term GDP by 16%.

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Reference

https://www.investmentexecutive.com/news/research-and-markets/canadas-economic-growth-
to-moderate-in-2019/
https://www.nationsencyclopedia.com/Americas/Canada-ECONOMIC-DEVELOPMENT.html
http://www.economywatch.com/economic-development/canada.html
https://tradingeconomics.com/canada/gdp-growth-annual
https://www.usaid.gov/afghanistan/economic-growth
https://www.theglobaleconomy.com/Afghanistan/Economic_growth/
https://en.wikipedia.org/wiki/Economy_of_Afghanistan
http://www.worldbank.org/en/topic/poverty/publication/poverty-reduction-in-afghanistan-
despite-economic-growth-widening-inequality
www.oecd.org/derec/unitedkingdom/40700982.pdf
http://www.umb.no/statisk/ior/angelsen_wunder__poverty_inequality_growth.pdf
https://www.globalpartnership.org/blog/5-ways-education-can-help-end-extreme-poverty