The country’s industrial production growth eased annually in 2024 amid geopolitical tensions that dragged demand, the Philippine Statistics Authority (PSA) reported on Friday.
Preliminary data from the PSA’s latest Monthly Integrated Survey of Chosen Industries showed that factory production, as measured by the amount of production index (VoPI), inched up by 0.9% on average last yr, slowing down from the 4.9% growth in 2023.
This was the bottom year-on-year growth in 4 years or because the sharp 40.5% contraction in the course of the coronavirus pandemic in 2020.
In December, VoPI inched up by 0.2% yr on yr, ending three straight months of decline.
It reversed the revised 3.9% drop in November. Nevertheless, it was slower than the three% recorded in December 2023.
On a seasonally adjusted month-on-month basis, industrial production rose by 4% in December, a turnaround from the 1.9% fall in November.
Compared, the S&P Global’s Philippines Manufacturing Purchasing Managers’ Index (PMI) climbed to 54.3 in December from 53.8 in November. The country’s fastest because the 54.8 reading in November 2017.
A PMI reading below 50 marks a contraction within the manufacturing sector, while a print above 50 marks an expansion.
Sergio R. Ortiz-Luis, Jr., honorary chairman on the Philippine Chamber of Commerce and Industry, said in a phone interview that geopolitical tensions might need caused a decrease in production orders.
“There’s loads of orders that were lost [last] yr and that’s why I feel geopolitics has affected this because we have now lost loads of trade. We lost loads of visitors, loads of investment from China,” Mr. Ortiz-Luis Jr., who also sits because the president of the Philippine Exporters Confederation, Inc., said.
He also added China moved to doing business with other Southeast Asian nations.
“While we’re increasing slowly, we’re being left behind by our neighbors who’re getting the majority of the orders and investment from China,” he said.
“I hope geopolitics can improve, I feel they need to, and the tensions lessen. There may be a decrease in our electronics [exports], which must have been strong, but is getting weak,” he added.
John Paolo R. Rivera, senior research fellow on the Philippine Institute for Development Studies, said in a Viber message that the easing in manufacturing output last yr suggests “softer” industrial and export activity.
“This aligns with broader economic headwinds, including tighter financial conditions and weaker global demand. It could indicate hesitation amongst firms to expand capability because of uncertainty in demand, high rates of interest, or elevated operating costs,” Mr. Rivera said.
He added that export manufacturing struggled, which can reflect “weak” global demand from China and the US.
Meanwhile, Mr. Rivera said the slight uptick in December was because of several aspects equivalent to improvements in logistics and raw material availability, policy support for the manufacturing sector, potential decline in global oil prices and easing inflationary pressures.
Nevertheless, he attributes the slower growth to weak external demand, higher borrowing costs, and weak private sector investments.
The PSA attributed the slight increase in December’s factory output growth rate to the manufacture of computer, electronic and optical products which was up 4.3% from a 5.8% decline in November, coke and refined petroleum products (4.4% from -11.6%), and transport equipment (6.1% from -0.2%).
Average capability utilization rate in December reached 75.5% in December, barely down from 75.7% in November.
Nineteen out of twenty-two industry divisions posted average capability utilization rates of at the least 70%.
“The manufacturing sector’s prospects for 2025 will hinge on monetary policy easing, recovery in global trade from major economies like US, China, and ASEAN… and increased infrastructure spending, industry incentives and investment-friendly policies,” Mr. Rivera said.
“If inflation stabilizes and energy costs remain manageable, production costs may ease, supporting growth,” he added.
The Bangko Sentral ng Pilipinas (BSP) kicked off its easing cycle in August last yr, slashing key rates of interest by a complete of 75 basis points by the top of 2024.
The BSP expects inflation to settle at 3.3% this yr, inside the 2-4% goal. — Kenneth H. Hernandez
