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Manufacturing shrinks by 10% in December


By Madelaine B. Miraflor

The manufacturing sector continued to decline until the last month of 2017, pushing the government to “aggressively” implement measure to make sure a recovery will happen this year.

In the Monthly Integrated Survey of Selected Industries (MISSI), the Philippine Statistics Authority reported that the Volume of Production Index (VoPI) for manufacturing contracted by 9.7 percent in December, 2017, a reversal from the 21.7 percent growth in the previous year.

The Value of Production Index (VaPI) likewise decreased by 10.3 percent, resulting in the year-to-date growth of VoPI and VaPI by 0.4 and -0.5 percent, respectively.

VaPI for manufacturing particularly recorded a two-digit annual drop of 10.3 percent in December 2017 from 16.6 percent growth in the same month of the previous year.

The reduction in VaPI was exhibited by 10 out of 20 major sectors, with two-digit decreases noted in the following: Chemical products (-68.2 percent), footwear and wearing apparel (-43.9 percent), tobacco products (-30.8 percent), textiles (-30.1 percent), and leather products (-12.4 percent).

Meanwhile, the decrease in VAPI was attributed to the contraction in VoPI in the following major sectors: Chemical products (-67.3 percent), footwear and wearing apparel (-42.9 percent), tobacco products (-31.8 percent) and textiles (-30.5 percent).

“The recent declines in manufacturing are a cause for concern but we are also fully aware of the opportunities that lie ahead: Robust domestic consumption demand, increased demand from government, and government’s resolve to improve the ease of doing business,” Socioeconomic Planning Secretary Ernesto M. Pernia said.

As a result of the decline, National Economic and Development Authority said the government will aggressively implement measures to ensure the recovery of manufacturing this year.

Pernia said the continuous roll out of infrastructure projects and programmed increase in social spending, among others, will also increase domestic demand for manufactured goods.

“To enable the manufacturing sector to take advantage of the increased demand, the government will continue to pursue policy reforms to facilitate business transactions,” Pernia said.

However, the NEDA chief said that the government must remain cautious on the short-term upward inflationary impact of Tax Reform for Acceleration and Inclusion (TRAIN) law as this may largely affect the cost of production, particularly of those energy-intensive manufacturing firms.

“Inflationary pressures, higher global raw material costs, and peso depreciation will continue to be a challenge to the sector’s growth,” Pernia said.

To support the growth of manufacturing, Pernia said local suppliers of raw materials and intermediate goods, especially the small and medium enterprises (SMEs), must enhance their production capacity so that they can meet the expected higher domestic demand and recovering external demand.

This can be done by expanding technology diffusion programs such as the Small Enterprise Technology Upgrading Program and the Shared Service Facility Project.

Pernia also said it is important to construct road networks and rehabilitate damaged roads for linking sources of raw materials and intermediate goods to processing sites.

“In terms of expanding market reach, we are continually pushing for the National Single Window and integrate it with the ASEAN Single Window. This will effectively reduce the cost of doing business,” he added.

Pernia likewise emphasized the need to encourage competition in telecommunications by easing or lifting relevant restrictions on foreign participation.

“Fast, reliable, and affordable internet services are needed for efficient business transactions and government services online,” Pernia further said.

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