Growth in the manufacturing sector started strong in 2016 as production of chemical products and food manufactures expanded in January, according to the National Economic and Development Authority (NEDA).

In the Philippine Statistics Authority’s Monthly Integrated Survey of Selected Industries for January 2016, the Volume of Production Index (VoPI) grew by 34.3 percent, nearly seven times more than its growth rate of 5.0 percent in December 2015.

Moreover, the Value of Production Index (VaPI) recovered from its consistent decline since April 2015 as it posted a 26.5-percent growth.

“The manufacturing sector is expected to grow more strongly for the year ahead following moderate growth in 2015 on account of weak global demand and adverse weather conditions,” said Socioeconomic Planning Secretary Emmanuel F. Esguerra.

He added that a bullish business outlook is anticipated for the second quarter of 2016 on the back of higher election-related spending activities and the roll-out of infrastructure projects.

“Continued implementation of projects under the public-private partnership and stronger domestic demand during the summer season will further support the growth in manufacturing sector,” said Esguerra, who is also NEDA Director-General.

For consumer goods, food manufactures posted a double-digit growth of 20.2 in terms of volume and 19.1 percent in value of production after a year of decline. Tobacco maintained its strength, growing in volume and value of production by 49.4 and 49.6 percent, respectively.

For intermediate goods, chemical products posted triple-digit growth in both volume (312.4%) and value (309.6%) of production.

However, petroleum continued to wane as it contracted by 35.1 and 33.7 percent in volume and value of production due to the continuing decline in global demand and the ample supply of diesel in the Asian market.

“The continued decline in oil prices is a double-edged sword that may increase our local production but may spell displacement of some of our overseas Filipino workers which in turn could affect the inflow of remittances,” the NEDA chief said.

The average capacity utilization remained at 83.5 percent for the fourth consecutive month, with basic metals posting the highest utilization rate of 88.4 percent. Among firms, 25.9 percent operated at full capacity (90-100%), 56.4 percent at 70-89% of capacity and 17.7 percent operated at below 70% of capacity.

“The government must remain vigilant as risks to growth remain. Slow recovery in advanced economies and economic slowdown in large emerging economies will continue to put pressure on the growth of international trade. On the domestic front, risks brought about by prolonged dry spell due to El Niño remains as a challenge,” said Esguerra.

However, he added that to enhance the capacity of the manufacturing sector and generate quality employment, efforts to boost productivity must be pursued.

“We must continuously push for innovation. The country must be able to develop new products, especially those with linkages to agriculture and aquaculture, which will create opportunities for the greater number of our population to partake in the benefits of growth,” said Esguerra.