Is personal savings important for the philippine economy?why? pls explain using macroeconomics concept?
Answer:
First of all, Philippine economy is in debt and it operates in deficit. The national income is not enough to cover for national expenditures, such as, debt servicing, providing social security, education, basic needs like, shelter, electricity, infra structure dev't etc., that's why Philippines continuously borrow money from int'l sources and ask for aid to fund development.
The question of personal savings in the macro level is important in a way provided that these saving are spent on products and services that the domestic market are producing/providing to prevent money from flowing outside the Philippine economy. On a national level, the government has to save in order to finance above mentioned expenditures specially ridding the country of its debt.
If and when the Philippines get out of its debt, then savings will now play a huge role. Savings then will translate to investments that would bring in income to its treasury improving the fiscal position of the Phlippines, it then now can improve providing basic services most especially providing high standard free education to its citizen, it can build infrastructures that would make farm to market products flow faster and cheaper making its products accessible to other nations, it can also connect to other countries in a faster and efficient manner so on and so forth.
Personal savings is important for economic growth and thus for the reduction of poverty. A necessary but not sufficient condition for rapid economic growth is a high level of savings which then permits a high level of investment in both physical and human capital. This increase in capital per worker will result in greater worker productivity and thus higher wages.
In addition, government and business savings is also important. Unfortunately, governments often dis-save, in other words, spend more than they receive in taxes. They then have to use some of the private savings to cover the government deficit.
A surprisingly large share of total savings is done by companies who reinvest their profits (called retained earnings) in expanding or modernizing their business instead of paying out the profits in dividends to the owners of the company. In developed countries, 80 percent of more of business investment is paid for with retained earnings.
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