PHALMOST 80% of our GDP is from private household consumption.
Is this good? For the ordinary Filipino, the answer is no. For business owners it is a big yes. For politicians eager to make his mark in Philippine politics, it’s a sad yes.
In March 2024 Household consumption was pegged at 78.3% of our entire GDP.
Simply put, almost eighty percent of our economy is fueled by household consumer spending which means only twenty percent comes from savings & investments, exports, and government spending — the other three components of a country’s GDP.
This is why a rise in nominal GDP is not necessarily a reflection of how resilient or evenly distributed the wealth of a country’s economy is since it only measures total spending.
The argument that an increase in consumer spending means an increase in household income is misleading. I’m referring to sustainable income sources either by employment, business or the practice of one’s profession among others.
While true for some it may not be true for everyone as there are what we call one off income type like selling one’s inherited property and spending it like there’s no tomorrow. Bad. Haha.
There are also our pensioners both from the government and private sector who get their pensions from SSS and the GSIS respectively. These seniors are also growing in numbers every year.
The typical profile of our senior-pensioners at the very least have a multitude of maintenance medicine and periodic diagnostics they spend their pensions on. Although not considered consumption they form part of household expenditures hence, GDP. And I’m not even going to talk about health care and hospitalization expenses.
One must also look at the savings rate for each household and compare it against their spending. It is interesting to note that the Philippines has one of the lowest savings rate per capita in ASEAN and even the world precisely for the reason we are a voracious consumer nation.
Less savings more expenses? Bad. Basic.
One also has to look at inflation as it affects household consumption since an increase in consumer prices will in effect increase consumer spending regardless of any commensurate increase in income.
The other most important thing one should consider but is usually left out of the discussion is household debt. It should be noted that consumer spending figures do not indicate whether they are from a household’s income stream or from debt they have incurred.
More debt + more expense? Bad. Basic.
Then we have the top 20% richest of our economy. How much percentage do the rich contribute to the overall consumer spending? Are they the ones doing most of the spending compared to the bottom 50%? If so then the income gap is very wide.
The rich get richer while the poor gets poorer. Bad. Basic.
But the most alarming thing is this: we are not only a consumer economy but also a dangerously net importing economy as whole. This puts us in a very precarious position subservient to those economies that supply ours.
We import most of the products we consume. Just think about it.
We import almost $2 billion from China each year while only export somewhere around $500 million to them. A trade deficit of one and half billion dollars.
For the third consecutive year if I’m not mistaken, we are the world’s top importer of rice, a staple to more than 80% of all Filipinos. We also import a lot of pork, beef, dairy, sugar and various other foodstuffs including fish. Yes. Fish.
More than half of all our farm inputs are imported. From feed components including corn to fertilizers and pesticides.
We even import Jackfruits for crying out loud! Langka we import from Vietnam and Indonesia at more than ₱500 million per year for use in ice cream and turon.
Do you know who the biggest producer of turon in the Philippines is? SM. In 2017 or so the SM group sold a staggering 150
million pieces of turon. At ₱20 apiece that’s ₱300 million gross sales for turon alone. Basic. Haha.
That’s a lot of langka. Imported I’m sure.
Our electronics exports contain 50-70 per cent imported components.
Our locally assembled motor vehicles for sale in our local market are made almost entirely of imported parts sourced from other ASEAN and Asian countries.
I could go on and on.
My point is this: the Philippines must look at China and Russia and to some extent our ASEAN neighbors and increase our manafacturing and production capacity in order to have a more self-reliant economy in conjunction with a vibrant consumer base.
Unfortunately, we are copying the USA model, the biggest consumer market in the world in terms of per capita spending yet has long outsourced it’s production to other countries.
If we alter our economic trajectory just a bit the benefits of our consumer spending will be plowed back to the country while relying less and less on other countries, just like China and Russia.
A consumer economy will only be good if you yourself produce much of what you consume.
So where does the EPALitician fit in all of these?
Ayuda economics of course. Spend more so he can give you more. Then the votes for him will also be more. Basic. Haha.
Is this good? For the ordinary Filipino, the answer is no. For business owners it is a big yes. For politicians eager to make his mark in Philippine politics, it’s a sad yes.
In March 2024 Household consumption was pegged at 78.3% of our entire GDP.
Simply put, almost eighty percent of our economy is fueled by household consumer spending which means only twenty percent comes from savings & investments, exports, and government spending — the other three components of a country’s GDP.
This is why a rise in nominal GDP is not necessarily a reflection of how resilient or evenly distributed the wealth of a country’s economy is since it only measures total spending.
The argument that an increase in consumer spending means an increase in household income is misleading. I’m referring to sustainable income sources either by employment, business or the practice of one’s profession among others.
While true for some it may not be true for everyone as there are what we call one off income type like selling one’s inherited property and spending it like there’s no tomorrow. Bad. Haha.
There are also our pensioners both from the government and private sector who get their pensions from SSS and the GSIS respectively. These seniors are also growing in numbers every year.
The typical profile of our senior-pensioners at the very least have a multitude of maintenance medicine and periodic diagnostics they spend their pensions on. Although not considered consumption they form part of household expenditures hence, GDP. And I’m not even going to talk about health care and hospitalization expenses.
One must also look at the savings rate for each household and compare it against their spending. It is interesting to note that the Philippines has one of the lowest savings rate per capita in ASEAN and even the world precisely for the reason we are a voracious consumer nation.
Less savings more expenses? Bad. Basic.
One also has to look at inflation as it affects household consumption since an increase in consumer prices will in effect increase consumer spending regardless of any commensurate increase in income.
The other most important thing one should consider but is usually left out of the discussion is household debt. It should be noted that consumer spending figures do not indicate whether they are from a household’s income stream or from debt they have incurred.
More debt + more expense? Bad. Basic.
Then we have the top 20% richest of our economy. How much percentage do the rich contribute to the overall consumer spending? Are they the ones doing most of the spending compared to the bottom 50%? If so then the income gap is very wide.
The rich get richer while the poor gets poorer. Bad. Basic.
But the most alarming thing is this: we are not only a consumer economy but also a dangerously net importing economy as whole. This puts us in a very precarious position subservient to those economies that supply ours.
We import most of the products we consume. Just think about it.
We import almost $2 billion from China each year while only export somewhere around $500 million to them. A trade deficit of one and half billion dollars.
For the third consecutive year if I’m not mistaken, we are the world’s top importer of rice, a staple to more than 80% of all Filipinos. We also import a lot of pork, beef, dairy, sugar and various other foodstuffs including fish. Yes. Fish.
More than half of all our farm inputs are imported. From feed components including corn to fertilizers and pesticides.
We even import Jackfruits for crying out loud! Langka we import from Vietnam and Indonesia at more than ₱500 million per year for use in ice cream and turon.
Do you know who the biggest producer of turon in the Philippines is? SM. In 2017 or so the SM group sold a staggering 150
million pieces of turon. At ₱20 apiece that’s ₱300 million gross sales for turon alone. Basic. Haha.
That’s a lot of langka. Imported I’m sure.
Our electronics exports contain 50-70 per cent imported components.
Our locally assembled motor vehicles for sale in our local market are made almost entirely of imported parts sourced from other ASEAN and Asian countries.
I could go on and on.
My point is this: the Philippines must look at China and Russia and to some extent our ASEAN neighbors and increase our manafacturing and production capacity in order to have a more self-reliant economy in conjunction with a vibrant consumer base.
Unfortunately, we are copying the USA model, the biggest consumer market in the world in terms of per capita spending yet has long outsourced it’s production to other countries.
If we alter our economic trajectory just a bit the benefits of our consumer spending will be plowed back to the country while relying less and less on other countries, just like China and Russia.
A consumer economy will only be good if you yourself produce much of what you consume.
So where does the EPALitician fit in all of these?
Ayuda economics of course. Spend more so he can give you more. Then the votes for him will also be more. Basic. Haha.
