Net Factor Income from Abroad

Topics: Economic growth, Gross domestic product, Economics Pages: 2 (452 words) Published: January 19, 2008
Net Factor Income from Abroad (NFIA) refers to the net flow of property income to and from the rest of the world (net payments on income) plus the net flow of compensation of employees (net receipts on compensation). The NFIA is added to the Gross Domestic Product (GDP) to come up with the Gross National Product (GNP).

In the Philippines, NFIA plays a major role in boosting the national economy. From 1987 to 2002, NFIA at constant 1985 prices totaled Php406.2 billion or 3.0% of the total GNP for the period covered. On the average, it accounts for 0.7 percentage point of GNP growth. Historically, NFIA at constant prices showed negative numbers prior to 1991 due to higher outflow of property expense. In 1991, it started recording positive levels attributable to the strong inflow of compensation and property income. The following year, 1992, it posted its highest growth of 237.0% due to the 19.3% drop in property expense and 6.7% increase in compensation.

Recent figures show that from 1998 to 2002, total NFIA at constant prices amounted to Php307.3 billion pesos or 6.0% of the total GNP. Moreover, it now accounts for 0.8 percentage point of GNP growth. Over the last five years, NFIA reached its highest growth of 24.0% in 2000 backed by strong contribution of property income and compensation inflow. The 45.4% and 18.3% increases in 2000 of property income and compensation, respectively, offset the 22.3% increase in property expense. In 2002, NFIA recorded its lowest growth of 5.1% due to the 33.8% fall in property income and with only 6.1% expansion in compensation.

Compensation of OFWs in the last five years equaled to Php438 billion and, on the average, contributed 24.7 percentage points to NFIA growth. In 2002, compensation of OFWs amounted to Php112.8 billion at constant prices and Php 402.5 billion at current prices. Net payments on income, on the other hand, continued to exhibit a higher outflow with property income totaling Php88.2 billion and...
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