PH manufacturing resilient amid global slowdown — DTI

PH manufacturing resilient amid global slowdown — DTI
DTI Secretary Ramon Lopez visits the Nestle Tanauan Factory in Batangas in this file photo. (Photo courtesy of DTI)


The Philippine manufacturing sector is proving to be resilient amid the global manufacturing slowdown, posting a 4.4-percent growth in the first half (H1) of 2019, the Department of Trade and Industry (DTI) said Tuesday, August 13.

DTI Secretary Ramon Lopez hailed the performance of the local manufacturing sector, citing how it fared better compared with its neighbors in under the Association of Southeast Asian Nations (ASEAN) and the rest of the world.   

While the global manufacturing slowdown weighed heavily on the world economy, the Philippine manufacturing sector was buoyed by sustained growth in a few export markets and strong domestic demand because of key economic reforms.

“The Philippines is the second-fastest growing economy in ASEAN in the 2nd quarter of 2019, with a GDP growth of 5.5 percent. The Duterte administration commits to a whole-of-government approach to resolve internal factors and strategize for external factors affecting the economy. At the heart of this is President Rodrigo Duterte’s mission of helping Filipinos live more comfortable lives,” Lopez said.

The Secretary noted that external demand has generally been dampened by weaker economic and manufacturing activities in many economies due to the escalation of global trade tensions especially between US and China. “This development increased policy uncertainty and disrupted manufacturing activities in the global value chain,” he said.

With the El Niño (dry spell) since the onset of the year, there have also been supply shocks that led to challenges in the agriculture and domestic food manufacturing sectors.

But Lopez said the manufacturing sector sees these as short-term challenges and that its outlook remains positive.

“For one, the reduction in global oil prices and the end of El Niño would improve the supply-side situation.  The electricity rate cuts that transpired in recent months may help revive manufacturing output in the near term, especially if these persist in future months. The appreciation of the Philippine peso vis-à-vis the US dollar is bringing down import costs, and will help reduce the cost burden of the local manufacturing sector.  Moreover, global demand for and production of manufactured products may bounce back, which bodes well for domestic manufacturing firms’ export orders, for as long as global trade policy uncertainties begin to dissipate,” he said.

The long-term growth trajectory of Philippine manufacturing has been on an uptrend, averaging 7.3 percent annual growth this decade of 2010-2018 compared with only 3.2 percent in 2000-2009. Furthermore, the first 12 quarters of the Duterte administration has witnessed an average manufacturing growth of 6.4 percent, compared with 6.3 percent in the same period during the previous administration.

Across sectors, manufacturing was the top recipient of foreign direct investments (FDIs) in 2018 and at the start of 2019 as well as of the Board of Investments (BOI)-approved investments last year, an indication of better manufacturing performance ahead.

Short and long-term strategies

The Secretary said the Department has been an active promoter of government policies and programs that are geared toward enhancing the competitiveness of the Philippine manufacturing sector since we need all the support we can give to rebuild our manufacturing capacities. This will help solve high importation and build capacities for export, thus addressing the long-term issue on trade imbalance.

Other strategies being pushed are the Ease of Doing Business (EODB), Inclusive Innovation Industrial Strategy (i3S), artificial intelligence (AI) promotion, micro, small, and medium enterprise (MSME) development, among others.

Build, build, build

DTI also supports the Build, Build, Build program for infrastructure development; recently enacted laws such as the rice tariffication law which fosters a more stable inflation environment and the Philippine Innovation Act and the Innovative Startup Act—both of which would push the country to become a more innovative economy; and legislative measures that will further relax foreign investment restrictions — such as amendments to the Public Services Act, Retail Trade Liberalization Act, and Foreign Investment Act — and reforming the country’s tax system which includes the modernization of investment incentives, among others.

“These game-changing reforms have positive implications for the medium- to long-term outlook of the Philippine economy including that of the local manufacturing sector. These reforms will generate employment and expand the production base that would in turn address the country’s trade imbalance,” said Lopez.

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