Election doesn’t happen all the time and this period only comes every after 3 years. Now, the question is, does it have any significant effect on our economy? Does it affect the decisions of investors? Does it contribute to the betterment of the companies in the country? During the election period, the economy is boosting due to major reasons in relation to the election. The economy’s performance is higher during this timeline compared to when the hype of the voting event subsides. And now that the National Election 2019 has passed, let’s take a look at the major factors that significantly impact our economy.
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Yes, domestic demand is higher during the election period because of the spending on election campaigns by political candidates and parties. Tarpaulins, posters, and lists are scattered everywhere. With all the campaign paraphernalia you see around, how much do you think the politicians spent to have those posted? Political candidates spend billions of peso to advertise themselves. Good thing this has a positive effect on the economy because the more they spend, the more billions they inject to the economy which in turn make job opportunities in specific industries and boost domestic demands.
Prior to the election period, government spending increases. Incumbent officials or those who are running for re-election tend to spend more of the government budget for new projects in relation to education, infrastructure, healthcare, and other social services. And since political candidates are constrained by the election ban, they spend more on projects during the pre-election period. No surprise our roads and highways are being reconstructed months before the election comes. One good benefit of higher government spending is a higher demand for supplies and contractors for new projects. This again creates job and investment opportunities in specific industries.
Domestic demand and government spending spike up but it cannot be compared to the growth in private investment which is the highest contributor that boosts the economy during pre-election to the election period. In fact, capital formation had an average of 17.6% in 2000-2018 election years. The movement was faster than the 4.8% average growth during non-election years. The capital formation we are talking about here includes investment in fixed capital such as in durable equipment and construction. Capital formation contributes positively to GDP growth during the election period and subsides down after a year or so. Now to answer if the election has an impact on the decisions of investors, yes it has and this period usually triggers investors to focus on industries that are likely to participate in government projects.