Marjorie A.

Pagsinuhin February 4, 2021

BSA 46234

1. List down 3 financial events happened in the Philippines for the past three years. Kindly discuss
how monetary and/or fiscal policy interfere.

a. During 2018, gross domestic product increased by 6.1 percent in the July-September period,
weaker than the previous quarter's 6.2 percent growth, as higher borrowing costs and
soaring consumer prices decreased domestic demand. The economic growth slowed and
inflation is at its fastest in nearly a decade, so in November, the Bangko Sentral ng Pilipinas
(BSP) raised interest rates for the fifth time in a year to cut off the impacts of inflation, as
surging prices have already translated into higher wages and transport fares. Due to this, the
public will take lesser loans and inflation will slow. – Monetary Policy (Bank/Discount Rate)

b. Due to the COVID19 pandemic, the Philippine economy was put into recession. In that matter,
the BSP reduced policy rate by a cumulative 175 basis point (bps) or 1.75%, by 25 bps (0.25%)
even before the pandemic became full-blown, followed by a series of three .5% bps cut in 4
months. They’ve cut reserve requirements by 2% for universal and commercial banks and by
1% for thrift banks and rural and cooperative banks. They also entered into a repurchase
agreement with national government through the Bureau of the Treasury (BTr), moreover,
they opened a daily one-hour window to purchase government securities in the secondary
market (open market operations). This would increase the country’s money supply and
expand credit in the economy. – Monetary Policy (Bank Rate, Reserve Requirements, Open
Market Operations)

c. After 20 years of non-adjustment of tax rates and brackets, the Duterte administration
enacted the Tax Reform for Acceleration and Inclusion (TRAIN) Law on December 2017,
correcting a longstanding inequity of the tax system by reducing personal income taxes for 99
percent of taxpayers. Individual taxpayers with taxable income not exceeding ₱250,000
annually are exempted from income tax. Tax rates for individual taxpayers still follow the
progressive tax system with the maximum rate of 35%, and minimum rates of 20% (taxable
years 2018 to 2022) and 15% (2023 onwards) On the other hand, consumption taxes, in the
form of higher excise tax on tobacco products, petroleum products, automobiles, tobacco, and
additional excise tax on sweetened beverages and non-essential, invasive cosmetic
procedures were introduced. This was implemented to boost the consumer’s spending power,
additional interest income and resources for government spending (public projects,
infrastructures. – Fiscal Policy – Taxation

Sources: [Link], ABS-CBN news page, ING website, [Link]

2. Search, read and type about definition and policies towards monopolies, oligopolies,
privatization and deregulation.

MONOPOLY
A market structure characterized by a single seller, selling a unique product in the market.
In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no
close substitute. In a monopoly market, factors like government license, ownership of resources,
Marjorie A. Pagsinuhin February 4, 2021
BSA 46234

copyright and patent and high starting cost make an entity a single seller of goods. All these factors
restrict the entry of other sellers in the market. Monopolies also possess some information that
is not known to other sellers. Characteristics associated with a monopoly market make the single
seller the market controller as well as the price maker. He enjoys the power of setting the price
for his goods.

OLIGOPOLY
An oligopoly is a market structure in which a few firms dominate. When a market is shared
between a few firms, it is said to be highly concentrated. Although only a few firms dominate, it
is possible that many small firms may also operate in the market. The number of sellers is greater
than one, yet not big enough to render negligible the influence of any one upon the market price.
On the basis of product differentiation, oligopoly may be classified as pure or perfect
oligopoly and imperfect or differentiated oligopoly. In the case of pure oligopoly, the product of
different firms in the industry is identical or homogeneous while in the case of differentiated
oligopoly, the products of different firms are not identical but rather differentiated products.
Thus, differentiated oligopoly will exist where the competing firms produce products which are
close substitutes but not perfect substitutes.

PRIVATIZATION

The transfer of ownership, property or business from the government to the private
sector is termed privatization. The government ceases to be the owner of the entity or business.
The process in which a publicly-traded company is taken over by a few people is also called
privatization. The stock of the company is no longer traded in the stock market and the general
public is barred from holding stake in such a company. The company gives up the name 'limited'
and starts using 'private limited' in its last name. Privatization is considered to bring more
efficiency and objectivity to the company, something that a government company is not
concerned about.

DEREGULATION

Deregulation is when the government reduces or eliminates restrictions on industries,

often with the goal of making it easier to do business. It removes a regulation that interferes with
firms' ability to compete, especially overseas. Consumer groups can also prompt deregulation, if
they feel the regulation is not serving their interests. They may also seek to remove regulations if
they find that industry leaders are too cozy with their regulatory authorities.

Pros of Deregulation:

1. Barriers to entry are decreased to small or new companies, fostering innovation,

competition, and increased consumer choice.
2. The free-market sets prices, which sometimes promotes growth.
3. Improves corporate efficiency, decreasing costs for consumers.
4. Companies have greater freedom to create monopolies.

Cons of Deregulation:

1. Asset bubbles are more likely to build and burst, creating crises and recessions.
Marjorie A. Pagsinuhin February 4, 2021
BSA 46234

2. Industries with initial infrastructure costs need government support to get started.
Examples include the electricity and cable industries.
3. Customers are more exposed to fraud and excessive risk-taking by companies.
4. Social concerns are lost. For example, businesses ignore damage to the environment.
5. Rural and other unprofitable populations are underserved.

Sources:
[Link]
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3. During pandemic, Ana lost her job and she is thinking of investing her last pay to the stock
market. Prepare SWOT analysis regarding investing in stock during pandemic.

✓ New investment ✓ Risk of loss

✓ New experience ✓ Cash outflow
✓ Flexibility (large number of stocks, ✓ Lack of stock knowledge and skills
financial markets, brokers, securities) ✓ Unpredictability of stock prices
✓ Low start-up cost (stock prices declined)

✓ Above average returns ✓ Economic recession

✓ To be able to become a shareholder of ✓ Stock company competitors
companies ✓ Low-cost entrants
✓ Market trends ✓ Possibility of increase charges
✓ Gain another kind of investment
(insurances, time-deposit)