Philippine manufacturing sector growth will remain moderate this year as a weak global economy continued to dampen external demand, the research arm of Metropolitan Bank and Trust Co. (Metrobank) said.
“Manufacturing might maintain its single-digit growth this year, as weak global growth will ease demand for manufacturing output,” Metrobank Research said.
Despite this, the think tank said local fundamentals remained solid and domestic spending would stay robust given the upcoming national elections.
“Therefore, consumer goods, durables, and construction-related manufactured goods may grow faster this year,” it pointed out.
While manufacturing growth slowed in 2015, it remained the highest contributor to the country’s 5.8 percent real gross domestic product growth for the year, Metrobank Research said.
In terms of value-added, it noted that the industry slowed in real terms to 5.7 percent year-on-year from 8.3 percent.
The Monthly Integrated Survey of Selected Industries by the Philippine Statistics Authority showed the sector’s production value as having contracted by 2.6 percent last December, from the 3.2 percent gain recorded 12 months earlier, on soft commodity prices and weak external demand.
Production volume slightly climbed to 4.9 percent compared to the 4.7 percent seen in a year earlier.
“Despite the weak numbers, specific segments such as processed fruits and vegetables, drugs and medicines, cement, iron and steel, and machinery were able to steadily grow for the past three years due to robust domestic demand and increasing infrastructure spending,” Metrobank Research noted.
The National Economic and Development Authority (NEDA) has said the government should help the manufacturing sector realize its potential by creating and strengthening linkages across all production sectors.
The agency said this would enhance the manufacturing’s capacity to absorb labor and help dampen the impact of the El Niño weather phenomenon, which is expected to last up to the middle of this year.
The government must also continue to improve infrastructure and encourage businesses to reap the benefits of free trade deals through aggressive information-sharing and simplified bureaucratic processes, it said.
Despite an unfavorable global economic climate, the NEDA said the manufacturing sector remained optimistic given low and stable inflation, good employment opportunities and increased consumer spending power.
A continued drop in petroleum prices will also keep operating costs minimal and boost the volume of production, it said.