Weak global demand and the prolonged dry spell from the El Niño phenomenon pulled down Philippine manufacturing production in May 2015, according to the National Economic and Development Authority (NEDA).
The country’s manufacturing sector contracted in volume 3.1% in May 2015 from an almost flat growth in April 2015 and from last year’s 12.7% growth, according to the Philippine Statistics Authority’s Monthly Integrated Survey of Selected Industries or MISSI. The sector likewise contracted in value terms 7.3% in May 2015 from an 11.4 %growth in the same month in 2014.
“Despite this slowdown in manufacturing, businesses remain optimistic. The low inflation environment, lower oil prices, continued inflow of remittances, expected strong demand from government expenditures, and the brisk business activity in the nearing election season will all help improve the sector’s performance in the coming months,” NEDA officer-in-charge and deputy director-general Emmanuel Esguerra said in a statement.
Despite the continued downward trend of the sector’s production value and volume, its three-month moving average remains positive at 4%.
In addition, the average capacity utilization of manufacturing firms grew slightly to 83.3% year-on-year, with 25.4% operating at full capacity (90%-100% ), 56.4% at medium capacity (70%-89%), and 18.2% at below capacity (70%).
“With the proper implementation of the Competition Law and the Philippine Archipelagic Sea Lanes Act, we expect improvement in the business climate. Also, the Comprehensive Automotive Resurgence Strategy will attract much needed foreign investments and spur the growth of transport equipment sector as well as textiles, glass, rubber and plastics, electronics and other related products,” the NEDA official said.
Meanwhile, the food sub-sector took a double-digit year-on-year drop of 13.1% in production and net sales value in May 2015 from last year’s 6.6% growth, with the sugar industry taking the brunt of the effect of the drought.
Petroleum’s production and net sales value also plunged by 23% and 29%, respectively, in May 2015.
“On a positive note, the sub-sector is expected to make a rebound after the imminent operation of Petron’s Bataan Refinery Master Plan 2 by the end of the second quarter. The facility will be the first to produce high value fuels in compliance with the Euro-5 standard, which will augment both local and export supplies,” Esguerra said.
Electrical machinery, the country’s top export product, also contracted in both production and net sales value and volume due to the decline in exports to China and Singapore.
“Efforts to pursue higher-value products and processes and new markets must be encouraged to maintain competitiveness and to compensate for the fragile export performance of the manufacturing sector,” Esguerra noted.
He added that small and medium enterprises should be supported to enable them to participate in the global value chain, maximize the benefits of free trade, and minimize their vulnerability to uncertainties in the global market, as well as take advantage of the upcoming ASEAN economic integration.
“Long-term measures such as reliable water supply must also be put into place to battle the possibility of another dry spell in the second half of 2015. The integration of agriculture and the manufacturing sectors, supported by efficient transport infrastructure, will be needed to spur growth,” Esguerra concluded.
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