May 7, 2019

Manufacturing production is expected to be buoyed by stronger domestic demand and business optimism despite the recent decline in performance, the National Economic and Development Authority (NEDA) said on Tuesday.

In its Monthly Integrated Survey of Selected Industries (MISSI) for March 2019, the Philippine Statistics Authority (PSA) reported that the Volume of Production Index (VoPI) and the Value of Production Index (VaPI) declined by 9.2 percent and 5.4 percent, respectively.

Factory output fell due to weak growth of food manufacturing, petroleum products, and basic metals.

“We expect the figures to improve in the coming months as we see increase in demand during summer, given the rise in the number of local and foreign tourists, easing of inflation, and increase in election-related spending. Government spending on infrastructure and other government services is also likely to catch-up,” Socioeconomic Planning Secretary Ernesto M. Pernia said.

However, the presence of El Niño could easily feed into a hike in power and water rates, which are essential inputs to the manufacturing sector. Fortunately, forecasts point to El Nino weakening starting May to August this year.

“Upward pressures on domestic oil prices and slight adjustment in electricity rate are expected to exert upward price pressures on the cost of inputs. Nonetheless, the continued decline in the price of rice and peso appreciation may partly be offsetting factors,” the Cabinet official said.

As for export-oriented manufactures, production of electrical machinery remains muted, given the subdued global outlook on semiconductors that is projected to grow by only 2.0 percent in 2019.

Meanwhile, the extension of implementation and payments for 2019 infrastructure projects beyond the fiscal year must be considered in the enforcement of the cash-based budgeting system.

“An immediate implementation of a catch-up plan after the passage of the 2019 budget must be pursued to regain the government’s spending momentum. This should, at the same time, counter the impact of the temporary interruption in the implementation of new and on-going projects as well as funding for social services,” said Pernia.

Moreover, to address losses in food manufacturing due to costly delays in the processing and issuance of clearances, permits or required certifications by food safety regulatory authorities (FSRAs), there is a need to improve the organizational and operational capacity of the Food and Drug Authority along with other FSRAs​.