Economic Growth and

Development
NOMINAL GDP VS
REAL GDP
 Using GDP or GNI to gauge a nation’s economic
health

• GNI/GDP at current prices or Nominal

GNI/GDP
-measures the value of output in a given
period in the prices of that period, or, as it is
sometimes put in current currency. (Dornbusch et
al., 2011).
• Real GNI/GDP or GNI/GDP at constant
prices
-measures changes in physical output in the
economy between different time periods by valuing all
goods produced in the two periods at the same time.
(Dornbusch et al., 2011).
measures the cost of a given
Nominal GNI bundle of goods in one year
Real GNI= GNI Deflator X 100 relative to the cost of the same
bundle of goods in the base year
 Nominal vs Real GDP
1993 1994 1994
QUANTITY
Casava 1000 pieces 1000 pieces 1000 pieces
Bread 1000 pieces 1000 pieces 1000 pieces
PRICE
Casava Php5/ pc Php6/ pc Php5/ pc
Bread Php10/pc Php11/ pc Php10/ pc
MARKET VALUE
Casava Php 5,000 Php 6,000 Php 5,000
Bread Php 10,000 Php 11,000 Php 10,000
NOMINAL GDP Php 15,000 Php 17,000 Php 15,000

Real GDP
GDP at constant price
 Selected output Indicators for the
Philippines, selected years
Item 2003 2004 2005 2006 2007 2008
GDP at current prices
4126 4871 5444 6031 6647 7409
(billion pesos)

GDP at constant prices

1085 1154 1211 1276 1367 1417
1985 (billion pesos)
Source: www.nscb.com.ph and www.nationmaster.com
GDP Deflator = Nominal GDP ÷ Real GDP
Measure Growth
> Growth Rate is the percentage change in real output from one period
to another
GR=(P2-P1/P1)*100
> Growth of output should be 5%-7% annual increase. -Todaro (2006)
> Development – sustain growth for 5 years.
Growth of output should exceed the population growth

Item 2003 2004 2005 2006 2007 2008

GDP at constant prices
1085 1154 1211 1276 1367 1417
1985 (billion pesos)
Population (million
80.17 81.62 83.05 84.59 91.08 96.06
person)
Source: www.nscb.com.ph and www.nationmaster.com

> Growth of output should exceed the population growth. -Schiller (2006)

Growth > Population = Economic Growth

of Output Growth
GNI for 2014 in million pesos in
constant price (2000) =8,640,668
Source: www.nscb.com

Population 2014: 99,138,690 Source: www.worldbank.org

GDP per capita or GNI per Capita = Value / Population

 Income group: As of 1 July 2013, the
World Bank income classifications by GNI
per capita are as follows:
 Low income: $1,035 or less

 Lower middle income: $1,036 to $4,085

 Upper middle income: $4,086 to $12,615

 High income: $12,616 or more

Low- and middle-income economies are

sometimes referred to as developing
economies.
Some Limitations of GDP or GNI as
measures of growth

 Ignores income distribution

 Ignores environmental degradation
 Does not include activities that do not go
through the formal markets sectors
 Does not include "illegal" activities like drug
trafficking, prostitution and etc.