Despite the robust performance of the manufacturing sector, rising inflation will remain a threat to its growth this year, according to the National Economic and Development Authority (Neda).
In a news statement issued on Thursday, Neda Officer in Charge Rosemarie G. Edillon said high commodity prices could impact negatively on the ability of the manufacturing sector to obtain raw and intermediate materials needed for production.
“Risks to growth remain. The government must remain cautious of increasing inflation, which may lead to higher cost of production for manufacturing firms. Strategies are needed to be pursued to sustain the upward growth trajectory of the manufacturing sector,” Edillon said.
In the Monthly Integrated Survey of Selected Industries of the Philippine Statistics Authority (PSA), the Volume of Production Index for manufacturing grew by 24.8 percent in February 2018, higher than the 9.8 percent registered in the previous year.
The Neda said this is a signal of a continued improvement from its slowdown since the second quarter of 2017.
The Value of Production Index, likewise, increased by 23.6 percent. This led to the three-month moving average growth rate of both indexes to remain in positive territory at 12.9 and 11.7 percent.
In order to sustain the growth, Edillon said the government needs to encourage all forms of innovation in manufacturing and manufacturing-related services, and to enhance the capacity of domestic firms, especially micro, small and medium enterprises.
“We need these initiatives to produce raw materials and intermediate goods that meet the requirements of international markets. We also need to pursue bureaucratic and regulatory reforms that incentivize compliance across all levels of government to eliminate red tape and reduce the cost of doing business,” Edillon said.
The Neda attributed the robust performance of the manufacturing performance in March to factors, such as the increase in the country’s working-age population.
It also said other factors include rising productivity, improvement in business environment and aggressive infrastructure development.
These factors, Edillon said, will likely help sustain manufacturing output growth in the coming months.
“The industries’ outlook for both the current and succeeding quarters remains bullish with the expectation of sustained robust demand, improvement in production capacity, new product lines and enhanced marketing strategies,” she added.
PSA data also showed the average capacity utilization rate in February for total manufacturing was recorded at 84.2 percent.
The PSA said this was due to 55 percent, or 11, out of the 20 major industries that operated at 80 percent and above capacity utilization rates.
The proportion of establishments that operated at full capacity (90 percent to 100 percent) was recorded at more than one-fourth of the total number of establishments (27.2 percent) in February.
About 54.3 percent of the total establishments operated at 70-percent to 89-percent capacity, while almost a fifth of the total establishments (18.5 percent) operated below 70-percent capacity.
Image credits: Nonie Reyes
