The nation\u2019s manufacturing production increase softened annually in 2024 due to geopolitical strains that hindered demand, the Philippine Statistics Authority (PSA) disclosed on Friday.<\/p>\n
Initial data from the PSA\u2019s recent Monthly Integrated Survey of Selected Industries indicated that factory output, gauged by the volume of production index (VoPI), edged up by 0.9% on average last year, a deceleration from the 4.9% increase recorded in 2023.<\/p>\n
This marked the lowest year-on-year growth in four years, or since the significant 40.5% decline during the COVID-19 pandemic in 2020.<\/p>\n
In December, VoPI rose by 0.2% year on year, concluding three consecutive months of decline.<\/p>\n
This reversed the revised 3.9% drop in November, although it was slower than the 3% reported in December 2023.<\/p>\n
On a seasonally adjusted month-on-month basis, industrial production increased by 4% in December, a rebound from the 1.9% decrease in November.<\/p>\n
Meanwhile, the S&P Global\u2019s Philippines Manufacturing Purchasing Managers\u2019 Index (PMI) rose to 54.3 in December from 53.8 in November, marking the fastest pace since the 54.8 reading in November 2017.<\/p>\n
A PMI value below 50 indicates a contraction in the manufacturing sector, whereas a figure above 50 signifies expansion.<\/p>\n
Sergio R. Ortiz-Luis, Jr., honorary chairman of the Philippine Chamber of Commerce and Industry, mentioned in a phone discussion that geopolitical tensions may have led to a reduction in production requests.<\/p>\n
\u201cMany orders were lost [last] year, and I believe geopolitics played a role in this as we have lost substantial trade. We have seen a significant decline in visitors and investments from China,\u201d Mr. Ortiz-Luis Jr., who also serves as the president of the Philippine Exporters Confederation, Inc., stated.<\/p>\n
He further remarked that China has shifted towards engaging in business with other Southeast Asian countries.<\/p>\n
\u201cWhile we are gradually improving, we are being left behind by our neighbors who are securing the majority of the orders and investments from China,\u201d he expressed.<\/p>\n
\u201cI hope geopolitical conditions can improve; I believe they must, and the tensions need to diminish. There has been a reduction in our electronics [exports], which should have been robust, but is now weakening,\u201d he added.<\/p>\n
John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, noted in a Viber message that the decline in manufacturing output last year reflects a \u201csofter\u201d industrial and export activity.<\/p>\n
This aligns with broader economic headwinds, encompassing stricter financial conditions and lower global demand. It may indicate a reluctance among companies to expand capacity due to demand uncertainties, elevated interest rates, or heightened operating costs, Mr. Rivera remarked.<\/p>\n
He added that export manufacturing faced challenges, potentially reflecting \u201cweak\u201d global demand from China and the US.<\/p>\n
In the meantime, Mr. Rivera explained that the slight rise in December was attributed to several factors, such as enhanced logistics and raw material availability, policy support for the manufacturing sector, a possible decline in global oil prices, and diminishing inflationary pressures.<\/p>\n
Nonetheless, he associates the sluggish growth with weak external demand, higher borrowing expenses, and limited investments from the private sector.<\/p>\n
The PSA credited the minor growth in factory output in December to the production of computer, electronic, and optical products, which experienced a 4.3% rise compared to a 5.8% decline in November, along with coke and refined petroleum products (up 4.4% from -11.6%), and transport equipment (6.1% from -0.2%).<\/p>\n
The average capacity utilization rate in December reached 75.5%, slightly down from 75.7% in November.<\/p>\n
Nineteen out of 22 industry divisions achieved average capacity utilization rates of at least 70%.<\/p>\n
\u201cThe manufacturing sector’s outlook for 2025 will depend on a relaxation of monetary policy, recovery in global trade from major economies like the US, China, and ASEAN… as well as increased infrastructure spending, industry incentives, and investment-friendly regulations,\u201d Mr. Rivera remarked.<\/p>\n
\u201cIf inflation stabilizes and energy costs remain manageable, production expenses may decrease, fostering growth,\u201d he added.<\/p>\n
The Bangko Sentral ng Pilipinas (BSP) commenced its easing cycle in August last year, reducing key interest rates by a total of 75 basis points by the close of 2024.<\/p>\n