Who cares about GNP or GDP?

What is the difference? Gross National Product (GNP) and Gross Domestic Product (GDP) are total sums of the monetary value of goods and services produced over a certain period of time. The first refers to what is produced by the Philippines or by Filipinos, anywhere; while the latter refers to what is produced in Philippine territory.

GNP is generally higher than GDP because it includes the value produced by the very large number of Overseas Filipino Workers (OFW). It counts, at a minimum, remittances from OFWs to their families back home, monitored by the banking circuits. These remittances are very important: the SWS surveys show that the families surveyed receiving remittances abroad are always better off in terms of economic indicators.

On the other hand, GNP should not count remittances from foreign companies doing legitimate business in the Philippines for profit to their home offices, or from foreign expatriates to their relatives back home. I wonder how much it costs; I doubt it’s insignificant.

The Western Philippine Sea. The territorial waters of the Philippines produce a value that should be counted in both GDP and GNP. The value of fish and other marine catch must be included, whether caught by Filipino fishermen or by foreign poachers.

The monetary value of the services rendered by the artificial islands created by China in the exclusive economic zone of the Philippines must be accounted for in both GDP and GNP. It does not matter that the value acquired by the intrusion is sold; what matters is that it can be monetized.

Philippine Offshore Gambling Operators (Pogos). The value created by Pogos should be included in our GDP. What the operators and their employees hand over to China is not part of the Philippines’ GNP, but of China’s GNP. I wonder if China cares to count the value of a service (gambling) that is legal to produce in the Philippines but illegal to produce in China, and yet is transferred via the internet for consumption in China.

The added value in production is at the same time an income. A production unit, such as a commercial enterprise or a family farm, engages in production by taking things outside of it (such as raw materials purchased from outside the unit) and applying its internal resources (such as its workers and non-human assets) for them, thereby adding value to external inputs.

The value of the unit’s output is its external cost plus the value added through wages, salaries and benefits paid to its internal resources. GDP is the aggregate of the values ​​added to the production units on the national territory. It is therefore also the aggregate income earned within the production units.

Dividing it by the population gives GDP per capita, loosely called “income per capita”. This does not mean that everyone earns the same amount; it is only what everyone could receive if the total revenue was shared equally.

Instrumental products versus beneficial products. While some commodities – such as food, liquor and entertainment – ​​are personally consumed and valued for their own sake, other commodities – such as policing, vaccinations, naval patrols, weather forecasts and the system judiciary – have value because they allow production units (as well as consumption units such as households and individuals) to operate more efficiently than if they were absent.

These enablers are instrumental rather than ultimately beneficial products; they are part of the social capital of the community. In an exercise counting in GNP only the costs of public education, health, labor and social protection, the balance – called net beneficial product – was only three-quarters of GNP , and its annual growth rate was one percentage point lower than that of GNP (see Leonardo Sta. Romana III, “Indicators of Economic Well-Being,” in my book, “Measuring the Development of the Philippines,” Development Academy of the Philippines, 1976).

So many GNP/GDP forecasts are made by banks. The reason why so many public, private and international banks regularly make NBI/GDP forecasts is, I think, because of the very strong correlation with their results. Regardless of which specific sectors of the economy grow, growth overall means a greater need for banking services as a whole. This means a greater base for government tax revenue and makes bank lending to government safer.

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