Economic Development and Economic Growth and it’s effect to Business and Investment

We have discussed last meeting the role of business in social and economic development
of a nation. Business plays a vital role in the economic development and wealth of a country.
Success in business translates to the economic well-being of a company and its people through
job creating, and offering improved quality of life for the residents of the country.
Business, on the other hand, will benefit if the country they are operating will experience
economic growth and development. They will also be encouraged to invest more if the economy
of the country is improving and developing.
The rate of economic growth affects the level of investment. Business investment tends to
be quite volatile. If businesses see an improvement in economic forecasts, they will increase
investment to meet future demand. Therefore, an improvement in the rate of economic growth can
cause a substantial rise in investment. But, if there is an economic downturn and a fall in the rate
of economic growth, business will cut back on investment. The accelerator theory states that the
level of investment is dependent on the rate of change of economic growth.
Indicators of economic conditions provide important insights to investors and businesses.
Investors use indicators of economic conditions to adjust their views on economic growth and
profitability. An improvement in economic conditions would lead investors to be more optimistic
about the future and potentially invest more as they expect positive returns. The opposite could be
true if economic conditions worsen. Similarly, businesses monitor economic conditions to gain
insight into their own sales growth and profitability. A fairly typical way of forecasting growth
would be to use the previous year's trend as a baseline and augment it with the latest economic
data and projections that are most relevant to their products and services. For example, a
construction company would look at economic conditions in the housing sector to understand
whether momentum is improving or slowing and adjust its business strategy accordingly.
However, in addition, to the rate of economic growth, the level of investment also depends
on the rate of interest, business confidence, technological progress and government regulations.
That is why it’s important for a country to make it sure that they present economic growth
and development to attract more businesses and investments.
Business owners and managers need to understand the effect of economic growth on
business, and also to be prepared to weather the ups and downs of a changing economy. Data on
economic growth and development of a certain nation/country where the business operates is very
important for managers/business owner to effectively and efficiently manage their resources and
carefully make decisions in their operations.

Economic growth creates more profitfor businesses. As a result, stock prices

rise. That gives companies capital to invest and hire more employees. As more
jobs are created, incomes rise. Consumers have more money to buy additional
products and services. Purchases drive higher economic growth. For this reason,
all countries want positive economic growth. This makes economic growth the
most watched economic indicator.
Defining Economic Development vs Economic Growth
ECONOMIC DEVELOPMENT –
 The process in which people in a country become wealthier, healthier, better
educated and have greater access to good quality of housing.
 It is the process by which emerging economies become advanced economies. In other
words, the process by which countries with low living standards become nations with high
living standards. Economic development also refers to the process by which the overall
health, well-being, and academic level the general population improves.
 It is all about improving living standards where there is a higher level of education
and literacy, workers’ income, health and lifespans.
 The main objective of economic development is to help residents achieve their dreams
and aspirations in life.
 It is about creating a place/community/country where people want to invest, work
and live. It is about making connections between people, companies, institutions and
communities.
 The process in which an economy grows or changes and become more advanced,
especially when both economic and social conditions are improved.
 it is the total process which includes not only economic growth or the
increase in the given amount of goods and services produced by the
country’s economy, but also considers the social, political, cultural, and
spiritual aspects of the country’s growth.
FEATURES OF ECONOMIC DEVELOPMENT INCLUDES
 People shift from agriculture to industry, then to service sector
 Higher literacy rate
 Better infrastructure
 Faster internet access
 Higher academic level
 Access to good quality housing
 Access to good quality healthcare
 Improvement of standard of living
Economic development takes into account the following information:

 Average life expectancy, i.e., how long people people’s lifespans are.
 Education standards.
 Literacy rates, i.e., what percentage of the population can read.
 Environmental standards.
 Availability of housing, plus the quality of housing.
 Access to healthcare. This takes into account the number of doctors per thousand
people, access to affordable medicine, etc.
 Income per capita.
Although the terms economic development and economic growth cover similar concepts, they are
not the same.

ECONOMIC GROWTH
 It is an increase in the production of goods and services over a specific period.
 Increase in output or production
 Refers to increase over the time in a country’s real output of goods and services (GDP,
national income, per capita income and social welfare)
 Economic growth is all about expanding GDP.
 GDP stand for Gross Domestic Product. It is the sum of all economic activity in a
nation over a period. It is the net value of all the products and services than an
economy produces.
Economic growth is not enough. Economic growth is a crucial condition for development.
However, just growth is not enough because it cannot guarantee development.
Amartya Kumar Sen, an Indian economist and philosopher, who received the Nobel
Memorial Prize in Economic Sciences, once said:

“Economic development is about creating freedom for people and removing obstacles to
greater freedom. Greater freedom enables people to choose their own destiny.”

“Obstacles to freedom, and hence to development, include poverty, lack of economic

opportunities, corruption, poor governance, lack of education and lack of health.”

Every nation/country should not just aim for economic growth. It is just one of the
objectives to increase economic development.

*Illustrate the growth and development using the human growth and
development
ECONOMIC DEVELOPMENT PHASES – are the distinct stages involved in the total
process of economic development in a particular country. These include a)
economic growth, b) improvement of the Human Development Index (HDI), c)
availability of benefits provided by science and technology, and d) societal
improvement of the opportunities and general welfare of its members.
Introduce the SDG 17 goals
The Sustainable Development Goals are the blueprint to achieve a better and more
sustainable future for all. They address the global challenges we face, including those related
to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice.
The Goals interconnect and in order to leave no one behind, it ís important that we achieve
each Goal and target by 2030
Introduce the Philippine Development Plan from 2017-2022 and the Ambisyon
2040

Economic Growth Leads to Profitability

Hands down, the biggest effect of economic growth on business is the chance of
increased profitability. Unless you are in one of the few industries that actually thrive
during economic downturn (such as home foreclosures or vehicle repossessions), your
business should experience growth that parallels that of the economy. Consumer
confidence is high, people have greater disposable income, and unemployment rates are
low. All of this leads to more people choosing to buy from businesses like yours.

Increased Opportunity for Expansion/Growth

This increased profitability results in greater opportunity for growth and expansion for your
business. It means you can hire the additional personnel you’ve been needing, or you can
move into a larger space that better meets your needs.

What’s really exciting about this growth and expansion is that it can pave the way for even
more growth. Using an economic upturn to hire more talent allows you to better serve
existing customers and have capacity to acquire new ones. Purchasing a larger space
gives you room to grow and offer new services. Acquiring another business can allow you
to expand your customer base, increase your team, and offer new services. Buying new
software or tools can streamline your efforts, cut costs, and make your team more
efficient. When you see the opportunity economic growth creates, you can position your
business for a cycle of growth, expansion, and continued opportunity.
But, while opportunity is an effect of economic growth on business, it’s one that must be
handled with care and wisdom.

Opportunity Requires Wisdom

Economic growth leads to increased revenue and profitability, which can create some
great opportunities for your business. But, these opportunities must be considered
carefully. As a business owner, you also need to be doing what you can to prepare your
business for inevitable economic downturn as well. Before jumping at every opportunity
that presents itself, you need to consider how it will affect your business should the
economy take a turn for the worse. This is a conversation that needs to be made with
trusted leadership at your business, such as financial advisors, shareholders or investors,
and team leadership.

The effect of economic growth on business is incredibility positive: your business is likely
to earn more customers, increase profitability, and experience great opportunities for
further growth and expansion. When you approach these opportunities with wisdom and
care, you are able to both grow your business and prepare it for any downturns that might
be in the future.

Why Business Matters

Business is directly related to the economic health and well-being of the citizens of the
city, region, state or country in which those businesses are active. Profitable
businesses drive economic health, which translates to a better quality of life for the
citizens.

The economic health of a region and its ability to sustain businesses – particularly
small businesses – can offer tremendous opportunities for diversity in business
ownership that might not otherwise exist. Communities and states that foster new
business development and assist with business creation derive benefits for their
citizens and residents through the products and services businesses provide, and
allow for opportunities for women and/or minorities to start and run businesses.

Almost 99 percent of women-owned businesses are considered small businesses,

according to the Small Business Administration. When you consider that women are
half the population and close to 50 percent of workers, this shows how important small
businesses can be for women and those who work in women-owned businesses.
Further, almost 60 percent of businesses owned by African-Americans are owned by
women.
The number of businesses is also important – the more, the better. Economic
diversification means less reliance upon one particular business or industry, and
allows the region to better withstand the normal ups and downs associated with the
cycle of doing business.

Role of Business in Development

Business is vital to a country’s economy. Success of businesses can drive the
success of an entire country, including through contributions to the gross domestic
product, or GDP, of a nation, which affects their world standing. If a country supports
businesses with goods and services that are in demand, everyone in the country
benefits. From job creation that results in money being put back into the community to
taxes that help the government smoothly run and provide maintenance and
improvements to the country’s infrastructure, or in other ways that are helpful for its
citizens, there are dozens of ways business success translates to economic
development.

In addition to providing products and services that citizens and residents want,
economic health can allow for exporting goods and services to others who want those
items, contribute to offering avenues for education and training for citizens, create
healthy business competition and provide additional methods of strengthening
economic development for the country as a whole.

The role of business in relation to the economy is a pivotal one. Small businesses
boost economic revenue on a smaller scale, but one that’s of vital importance, directly
and positively affecting the health, quality of life and purchasing power of residents in
the local community.

But small businesses don’t always stay small. Many nationally known brands today got
their start as very small businesses run out of someone’s home or garage. Startups
can become multinational companies that can have a huge and positive impact on the
global economy, benefiting all of the company’s employees and the communities in
which those businesses thrive. Apple, Whole Foods, Amazon and Starbucks were all
ideas started on a small scale that have had incredible, explosive positive impacts not
just on the U.S. economy, but on a global scale.