How to take advantage of a growing economy

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SERGE B. BARGAYO, RFP

SERGE B. BARGAYO, RFP

Over the past two quarters of 2016 we have experienced an average growth of 6.9 percent in our country’s GDP. We remain one of the fastest growing economies among the major emerging ones in Asia. We surpassed China last quarter. This has become a trending topic in social media lately. Some people are grateful about it, but the majority, when asked about what they thought of the impact of economic growth, simply did not care.

Can this growth provide additional income to majority of Filipinos here? How does nearly 7 percent growth affect us as a country? How can we take advantage of this? Will this accrue to more benefits for us? A lot of questions have been thrown around about this GDP growth. But what is the real score?

When GDP grows 7 percent, you can bet that means a lot. Gross Domestic Product is the composition of a nation’s total consumption, investments, government spending and net export over a specified period of time. Out of the four compositions of GDP, consumption is the biggest contributor of our growth. It means that our economy is consumer-driven, that our growing population has been creating increasing demand for goods to consume from day to day. And if there is growing demand from consumers, businesses tend to expand to supply this demand, which consequently means higher investment requirements. The second contributor would be remittances from Filipinos abroad.

Economic perspective

Our economy is like a convoy of cars, it tries to adjust its speed to the slowest moving vehicle. It faces a trade-off between equality and efficiency. These two often create conflict. Why? Because efficiency tends to demand the maximum benefits from our resources (like companies tend to maximize output) while equality tends to distribute the fruits of economic prosperity uniformly among members of society. When these two meet, it creates equilibrium for our economy.

When there is growth, businesses plan to expand their existing capacity to adjust to the higher output demanded by the market. When this happens, instead of increasing the salaries of existing employees, employment expands or the number of jobs grows and that helps the unemployed find a way to earn a living. With this cycle, it stimulates consumption and investment, which ramps up our GDP even more.

Majority of Filipinos, when asked about our country’s economic growth, said they felt no impact from it because their incomes have not increased much.

Benefits from the economic growth

First, when the economy is up, the average income of household also goes up normally, and the standard of living is supposed to improve. That would indicate that people are spending more.

Second, with higher output and an optimistic view on the future of the economy, firms tend to expand and human capital requirements gradually increase, which drives our employment rate upward. When the employment rate is up, the purchasing power of the nation increases as well.

Third, the government will improve its public services. As the nation tries to spend more, government tax collection also rises. With higher tax revenues, the government no longer has to worry about insufficient budget for public services such as road widening, public school buildings, etc.

And lastly, as a result of economic growth, increased capital investment should start yielding some positive results. It encourages an inflow of investment from local and foreign investors. That, in turn, should make economic growth sustainable for the long term.

How to take advantage of this growth

Now, here are some ways we can take advantage of our economic growth. Let us think outside the box. Always remember what Charles Darwin has said about survival: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”

If you are in business, you are on the right spot.

Develop new strategies that will induce greater demand and attract buyers for your goods or services. Ask yourself, how can I serve more customers?

Second, work intelligently on your sales and marketing. Keep asking yourself, am I reaching the right market? How can I reach more?

Third, diversify your assets. Don’t put all your eggs in one basket for they might all hatch at the same time.
Last, strategize to keep the right people. Human resources are the greatest asset a company can have. They are the only asset that can increase in value. Always find ways to recruit and maintain the right personnel.

Serge Barcenas Bargayo is a Registered Financial Planner based in Cebu. He is the Managing Director of Certa Inc. (Family Estate Planning and Investment Advisory) and he specializes in risk management. To learn more about financial planning, attend the 3rd RFP program in Cebu on Sept 28-30. To register, e-mail info@rfp.ph or text <name><e-mail><RFP> at 0917-9689774.

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