April 5, 2019

An expected increase in domestic demand this summer, election-related spending, and the downward trend in prices of goods would likely help the manufacturing sector recover from the slump recorded earlier this year, the National Economic and Development Authority (NEDA) said.

The Philippine Statistics Authority (PSA), in its latest Monthly Integrated Survey of Selected Industries or MISSI, reported a decline in manufacturing output for the month of February 2019 despite an increase in sales.

The Volume of Production Index (VoPI) and the Value of Production Index (VaPI) declined by 8.5 percent and 5.5 percent, respectively.

“Despite this, the heightened election-related spending will drive up demand for goods and services leading up to May and improve domestic demand in the second quarter of the year. Backed by optimistic business and consumer outlook, this will help the sector bounce back,” NEDA Officer-in-Charge (OIC) and Undersecretary Adoracion M. Navarro said.

Declines were observed in food manufactures, basic metals, non-metallic mineral products, and electrical machinery. However, beverages, footwear and wearing apparel, fabricated metal products, wood and wood products, textiles, and paper and paper products reported growth in output.

“Also, easing inflationary pressures bode well for the overall manufacturing output as rice and other agricultural commodities recorded price declines,” the NEDA official said.

As of February 1, 2019, stocks of commercial and NFA rice have already improved as a result of the timely importation.

“Some provisions of the Rice Tariffication Law such as the imposition of tariff rates are immediately executory to address the issue of supply constraints,” Navarro said, adding that food prices will likely be under control despite domestic supply constraints caused by El Niño.

Navarro, however, warned of the risks that need to be managed.

“El Niño could prolong and further intensify the dry season, and the adverse impacts of this phenomenon could easily feed into a hike in power and water rates, which are essential inputs to the manufacturing sector,” she said.

Navarro also noted that the delay in the passage of the General Appropriations Act  for 2019 can further hold back government investments in the development priority areas of public infrastructure and social services.

“The immediate implementation of a catch-up plan must be pursued once the 2019 budget is passed to regain the government’s spending momentum and at the same time counter the impact of the temporary interruption in the implementation of new projects,” Navarro said.

She added that in order to minimize the negative impact of government operating on a reenacted budget on economic growth, granting of certificates of exemption to different implementing agencies is needed.

Navarro is OIC of NEDA while Socioeconomic Planning Secretary Ernesto M. Pernia is on official travel abroad.