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Economic Policies of Aquino Administration

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Gideoni Pong

on 21 March 2014

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Transcript of Economic Policies of Aquino Administration



Sustainable economic growth requires inclusive growth. Maintaining this is sometimes difficult because economic growth may give rise to negative externalities, such as a rise in corruption, which is a major problem in developing nations. Nonetheless, an emphasis on inclusiveness - especially, on equality of opportunity in terms of access to markets, resources, and unbiased regulatory environment for businesses and individuals - is an essential ingredient of successful growth strategies. The inclusive growth approach takes a longer-term perspective, as the focus is on productive employment as a means of increasing the incomes of poor and excluded groups and raising their standards of living.


Economic Policies of Aquino Administration

Sumampong, Gideoni A.
Bacarisas, Arvin
Saito, Tsugio
BIT-3A

Zero-based budgeting
is an approach to planning and decision-making which reverses the working process of traditional budgeting. In traditional incremental budgeting (Historic Budgeting), departmental managers justify only variances versus past years, based on the assumption that the "baseline" is automatically approved. By contrast, in zero-based budgeting, every line item of the budget must be approved, rather than only changes. During the review process, no reference is made to the previous level of expenditure. Zero-based budgeting requires the budget request be re-evaluated thoroughly, starting from the zero-base. This process is independent of whether the total budget or specific line items are increasing or decreasing.
The introduction Zero-Based Budgeting (ZBB) approach was the first reform that President Aquino instructed us to use, both in creating fiscal space in the 2010 Budget that he inherited, as well as in designing the 2011 Budget, the first of his administration. Through ZBB, we were able to review the relevance of programs and projects; in terminating or redesigning those which have been inefficient and ineffective, such as the DepEd Food for School program, the NFA rice subsidy program, among others; and in reallocating funds where these are needed and where this will create impact.
The administration under President Benigno S. Aquino III, through the Department of Budget and Management (DBM), has laid down its Budget Priorities Framework for 2014-2016, effectively setting the government’s course in establishing rapid, long-term, and inclusive development before the conclusion of President Aquino’s term. Inclusive growth is a concept which advances equitable opportunities for economic participants during the process of economic growth with benefits incurred by every section of society. Inclusive growth implies direct links between the macroeconomic and microeconomic determinants of the economy and economic growth. The microeconomic dimension captures the importance of structural transformation for economic diversification and competition, while the macro dimension refers to changes in economic aggregates such as the country’s gross national product (GNP) or gross domestic product (GDP), total factor productivity, and aggregate factor inputs.
Sustainable economic growth requires inclusive growth. Maintaining this is sometimes difficult because economic growth may give rise to negative externalities, such as a rise in corruption, which is a major problem in developing nations. Nonetheless, an emphasis on inclusiveness - especially, on equality of opportunity in terms of access to markets, resources, and unbiased regulatory environment for businesses and individuals - is an essential ingredient of successful growth strategies. The inclusive growth approach takes a longer-term perspective, as the focus is on productive employment as a means of increasing the incomes of poor and excluded groups and raising their standards of living.
Affirmative action is the policy of providing special opportunities for, and favoring members of, a disadvantaged group who suffer discrimination. The nature of positive discrimination policies varies from region to region. Some countries, such as India, use a quota system, whereby a certain percentage of jobs or school vacancies must be set aside for members of a certain group. In some other regions, specific quotas do not exist; instead, members of minorities are given preference in selection processes.
Macroeconomic Policy- Growing output and employment are the preconditions for progress in almost all social and economic aspects of development. Productive employment and rising incomes for the vast majority over a long period can do more to combat poverty decisively than any direct assistance government can ever provide.
It is private actors – from the smallest self-employed entrepreneurs to the largest conglomerates – that create productive jobs and incomes. Government’s responsibility however – through fiscal and monetary policies – is to create an environment for vigorous economic activity, as well as to ensure that enough gains from growth are set aside for larger social purposes or channeled into social investments that facilitate future growth. These objectives are achieved by government decisions regarding the size and direction of public spending and taxation (fiscal policy) and by decisions regarding the control of the nation’s money supply (monetary policy).
Monetary policy- Central banks implement monetary policy by controlling the money supply through several mechanisms. Typically, central banks take action by issuing money to buy bonds (or other assets), which boosts the supply of money and lowers interest rates, or, in the case of contractionary monetary policy, banks sell bonds and takes money out of circulation. Usually policy is not implemented by directly targeting the supply of money. Banks continuously shift the money supply to maintain a fixed interest rate target. Some banks allow the interest rate to fluctuate and focus on targeting inflation rates instead. Central banks generally try to achieve high output without letting loose monetary policy creates large amounts of inflation. Conventional monetary policy can be ineffective in situations such as a liquidity trap(A liquidity trap is a situation in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth).
Fiscal policy- Fiscal policy is the use of government's revenue and expenditure as instruments to influence the economy. If the economy is producing less than potential output, government spending can be used to employ idle resources and boost output. Government spending does not have to make up for the entire output gap. There is a multiplier effect that boosts the impact of government spending. For example, when the government pays for a bridge, the project not only adds the value of the bridge to output, it also allows the bridge workers to increase their consumption and investment, which also help close the output gap. The effects of fiscal policy can be limited by crowding out. When government takes on spending projects, it limits the amount of resources available for the private sector to use. Crowding out occurs when government spending simply replaces private sector output instead of adding additional output to the economy.
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