To put it in the simplest terms possible, economic growth is defined as an increase in an economy’s aggregate production, which is typically reflected in an increase in the level of national income. There is a correlation between overall increases in production and higher average marginal productivity. This is not always the case, however. This results in a rise in incomes, which encourages consumers to pull out their wallets and make additional purchases, which ultimately results in an improved the quality of life and standard of living.
It is really important because economic growth boosts state capability and public good production. The capacity and resources required to supply public goods and services that the community needs, such as healthcare, education, social protection, and fundamental public services, are gained when economies grow and governments may tax that revenues. In addition to state benefits, inclusive growth results in larger economic gain. Wealth is produced by growth, some of which directly benefits businesses and employees by enhancing their well-being. When people’s incomes rise and their spending increases, they can leave poverty and reach greater standard of living.. We don’t want it to look like we oppose economic growth, even if we believe that it should be a tool rather than the goal of progress. Looking across the world, you discover that most cities that have made progress in lowering poverty and boosting access to basic goods have done so on the back sides of strong economic growth.
Current Economic Growth in the Philippines
According to a research published by the Asian Development Bank on December 14, 2022, the Philippine economy is predicted to expand more quickly than originally expected in 2022. Due to increased employment and a return in tourism after the government lifted COVID-19 restrictions, domestic demand will be better than expected. 2022 will see 7.4% growth in the Philippine economy. This is higher than the bank’s September forecast of 6.5% growth. In 2023, gross domestic product growth is anticipated to slowdown to 6.0% from 6.3%.
In 2022, the Philippine economy demonstrated a strong underlying leading position in the market and resilience, and this is anticipated to continue in 2023, bringing GDP growth closer to its long production rate of roughly 6%.
Risks to growth in 2023 include ongoing inflation, additional interest rate increases, and a more severe fall in advanced economies’ GDP growth than expected. The Philippines’ growth rate will be higher than that of its neighbors in Southeast Asia. Commodity prices, including oil, are probably going to keep rising in 2023 due to the prolonged uncertainty brought on by Russia’s invasion of Ukraine. The Philippines, which imports the majority of its oil needs, will have a serious problem with this. In order to boost employment and set the foundation for a more strong and stable economy, the government has stated that it intends to continue investing in its large infrastructure projects.
Ways to help cities and Economic Development
The potential for better efficiency brought about by overpopulation, brilliant human capital, and access to resources is the primary economic advantage that urban regions offer. Urban areas also offer many other advantages. These economies of scale boost labor productivity and make it possible for the private sector to expand. In a similar manner, educational and medical institutions located in urban regions can function on a greater scale to provide services that are more specialized. The delivery of critical services such as power, water, sewage, and waste management are all examples of areas in which economies of scale may be applicable. It will be more cost effective for cities to supply public goods as they continue to build the necessary infrastructure and delivery systems for key services. Cities also play an important part in facilitating commerce, which is a primary driver of rapid economic expansion in the developing countries. Additionally, lively urban markets create an environment that is conducive to the ingenuity and entrepreneurship of business owners.
Invest more in tangible forms of capital.
The introduction of new capital into the economy usually results in a rise in the productivity of labor. When workers have access to better, more advanced, and more tools, they are able to produce more output in the same amount of time. A straightforward illustration of this would be to compare a fisherman who uses a net to one who uses a pointed stick to see which one catches more fish in the same amount of time. Having said that, there are two elements that are essential to the process. In order to free up resources that can be used to produce new capital, it is necessary for someone already participating in the economy to first engage in some type of saving (by reducing their level of current consumption). In addition to this, the new capital must be of the appropriate kind, located in the appropriate location, and made available at the appropriate time for workers to really be able to use it effectively.
Technology Needs to Be Improved
The development of gasoline is a good illustration of this principle; prior to the realization that gasoline could be used as a source of energy. The usage of gasoline evolved into a better and more productive means for moving things that were still in the process of being manufactured and for distributing finished commodities in a more effective manner. Because of advances in technology, employees are now able to generate more output using the same quantity of capital goods by combining those assets in creative ways that result in increased productivity. In the same way that capital growth is strongly dependent on the rate of savings and investment, the rate of technological growth is also highly dependent on these rates, as they are required to participate in research and development.
Sustainable modes of transportation and energy sources
Because of their direct influence on factors such as people’s productivity, the vitality of cities and economic development, and the sustainability of the environment, governments should place more emphasis on environmentally responsible modes of transportation and energy production. The untapped economic potential of cities can be realized with improved mobility, which will also lead to more inclusion. The use of electric vehicles in public transportation systems is one example of a sustainable transportation option that might be implemented. Solar networks at the household and community level are one example of a sustainable energy choice. These grids will become more cost-effective and widely available as solar photovoltaic cells continue to fall in price and gain market share. Systems that convert trash into energy are another alternative, and they have the potential to increase urban sustainability.
Increase the Size of the Workforce.
Increasing the size of the labor force is another strategy to help cities and economic development. If everything else stays the same, more people working in an economy results in more products and services being produced. Increasing the size of the labor force will invariably result in a rise in the quantity of output that needs to be consumed in order to provide for the new workers’ fundamental needs. As a result, the new workers will need to be at least as productive as the existing workforce in order to avoid becoming net consumers. In addition, in the same way that it is essential to make additions to capital, it is essential for the appropriate workers to flow to the appropriate jobs in the appropriate locations in conjunction with the appropriate types of complementary capital goods in order for an organization to realize its full productive potential.
Invest more on the human resource.
Increasing human capital results in workers being more skilled at their trades, which in turn increases their output. This can happen as a result of skills training, learning from one’s mistakes, or simply putting in more time and effort. The strategies of savings, investment, and specialization are the ones that provide the most consistent results and are the easiest to govern. The term “human capital” can also refer to social and institutional capital when discussing this topic. Different forms of human capital, such as behavioral tendencies toward stronger social trust and reciprocity, combined with political or economic advances such as improved protections for property rights, can each contribute to an improvement in the economy’s overall rate of productive activity.
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Written by Alfred Alaba