Despite dismal April growth, manufacturing sector still upbeat

MANILA, Philippines – Although Philippine production output slowed down in April 2015, the National Economic and Development Authority (NEDA) said on Wednesday, June 10, that the outlook for the manufacturing sector remains upbeat.

According to the Philippine Statistics Authority’s (PSA) Monthly Integrated Survey of Selected Industries (MISSI), the manufacturing sector’s Volume of Production Index (VOPI) slightly grew by 1.4% in April 2015, lower than the 16.1% expansion in March and the 10.8% growth a year ago.

The sector’s Value of Production (VOP) fell by 4.2% in the period, reversing the 9.7% growth in the previous month and the 10.9% expansion in April 2014.

Among the surveyed firms, 26.4% operated at full capacity (90% to 100%); 55.3%  at 70% to 89% capacity; and 18.3% below 70% capacity.

Still optimistic

Infographics from the National Economic and Development Authority

Despite the slowdown in April, NEDA Director General Arsenio M. Balisacan said investors remain confident in the country's manufacturing sector.

He cited the recent expansion of Taiheiyo Cement Philippines, Incorporated’s facilities in San Fernando, Cebu, to boost productive capacity in anticipation of higher demand for construction materials.

Some firms would also want to maximize the duty-free benefits in the country under the European Union’s Generalized Scheme of Preferences Plus.

“A number of Japanese firms are also poised to relocate to the country,” Balisacan added. (READ: 200 Japanese firms in China want to move to PH)

Meanwhile, average capacity utilization remained at 83.2% during the period. The basic metals subsector had the highest average capacity utilization at 88.8% in April 2015, slightly higher than the 88.5% last year.

The NEDA chief said that since basic metals are among the backbone industries with high forward linkages, its high average capacity utilization will enhance firms’ capacity to respond to the increasing demand of other subsectors, particularly private construction and government infrastructure projects.

The chemicals and tobacco industries sustained their strength for the period, countering the slowdown in the production of food and petroleum products.

Also, leather, printing, basic metals, and machinery (except electrical) registered double-digit growth.

Uncertainties remain

Balisacan said that despite the optimism, the adverse effects of El Niño and uncertainties in the global market still pose significant risks.

"The government must encourage more value-adding activities, especially those that increase linkage between agriculture and manufacturing. Production would need to diversify further to areas and subsectors, [and] for this to be realized, an efficient transport and logistics should be put in place," Balisacan pointed out.

He also reiterated the country’s continuous need to undertake efforts in improving business climate, addressing long-standing power security issues, and diversifying the country’s range of products.

Small and medium enterprises must also participate in regional and global markets, in line with the ASEAN economic integration, and pursue diversification of export products and markets, given uncertainties in global demand.

"This is vital to sustain the global competitiveness of the country and survive the low demand from the country’s top export markets,” Balisacan added. (READ: PH exports fall in April, lowest in 2 years)

Exports growth fell by 4.1% in April this year, NEDA reported Wednesday.

Exports rebounded in March to 2.1%, but the contraction in April marked the lowest since the 5.8% contraction in February 2013. – Rappler.com

Cement plant concept image via Shutterstock