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NEWS UPDATES Asean Affairs                            5  September 2011

Philippine manufacturing to slow

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THE manufacturing sector will grow at a slower pace this year as firms producing semiconductors, electronics, food and ready-to wear-apparels are expected to take a hit from the financial turmoil in the US and Europe, according to a research company.

Dr. Nick Fontanilla, president of The Asian Centre for Enterprise Development, told this reporter that the four sectors are the most dependent on debt-plagued economies in the West.

Still reeling from the after effects of the twin disasters in Japan, Philippine manufacturers have adjusted to the supply disruptions, but have yet to return to a level where operations have normalized.

“But many other sectors in manufacturing are domestic driven and they will be able to keep momentum growing,” said Fontanilla.

The purchasing managers’ index, a key measure of manufacturing activity, fell by an index point to 56.50 in July from 57.50 in the previous month, marking its third consecutive expansion after contracting in April.

An index of more than 50 represents growth in the manufacturing sector, while a reading under 50 signifies a contraction. A reading at 50 indicates no change.

“As in the past especially in the last crisis in 2008 that went on to 2009, the Philippine economy was not so affected. We were able to survive it. The bigger companies and exporters were doing pretty well and their recovery was kind of fast,” Fontanilla said.

“We are not that dependent on the global economy so on situations when there is a crisis we are not so affected, but during situations where there is an expansion or a boom we are not growing very much either,” he said.

Manufacturing grew at a much slower pace in 2009, when the index stood at 53.72 compared with the following year’s 58.66.

Fontanilla expects the peso and the pound to further strengthen, thus reducing the cost of importing goods.

“Because of that crisis, imports will be less costly. Supply will exceed demand so we can probably negotiate for lower prices,” he said.

Fontanilla added that the services and retail indices continue to perform well, which will further boost the resiliency of the Philippine economy.

“We continue to generate overseas remittances even with the problems in the US, Middle East and Europe. I think our remittances are still doing very well,” he said.

The retail and wholesale index stayed at a higher growth mode in July at 57.1, well above the growth threshold, but unchanged from the previous month.

The services index rose to its highest level for the year at 66.7, or 1.97 points higher than June.


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