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Philippines: Factory growth seen at 6% in next 2 years

MANILA, Philippines –  Barcelona-based think tank FocusEconomics said the country’s manufacturing sector would continue to expand close to six percent over the next two years.

Massimo Bassetti, economist at FocusEconomics, said manufacturing is seen rising 5.9 percent in 2017 and 2018.

“The Philippines’ manufacturing industry gained momentum in May,” he said.

He cited the reports provided by Nikkei and IHS Markit that showed the Manufacturing Purchasing Managers’ Index increased to a five-month high of 54.3 in May from 53.3 in April.

“The index thus moved further above the 50-point threshold which separates expansion from contraction in the manufacturing sector,” he added.

The economist said May’s acceleration came mainly on the back of faster growth in output, new orders and employment.

According to him, new orders expanded solidly in May, growing at the fastest pace in three months, in part thanks to product launches and client acquisitions.

On the external front, he explained export sales continued to rise, although at a significantly softer pace than total new orders, confirming that domestic demand is the main driver of growth in manufacturing.

“Strong growth in new orders led to an acceleration in output growth and staff hiring, while backlogs of work, thanks to the additional staff and abundant production capacity, declined for the fifteenth month straight,” Bassetti said.

Regarding prices, he said the rise in input costs softened but remained robust overall, due to a weaker peso and higher raw material prices, and translated into a smaller hike in output prices.

Bernard Aw, economist at IHS Markit, said buoyant domestic demand and business optimism augur well for the strong growth momentum to be sustained towards the end of the second quarter.

“Business optimism and a healthy sales pipeline hint that the robust hiring pace is likely to continue. Furthermore, ongoing public infrastructure spending and domestic consumption should continue to support manufacturing activity in the coming months,” Aw said.

The country’s gross domestic product (GDP) growth eased to 6.4 percent in the first quarter from 6.6 percent in the fourth quarter of the year amid weaker-than-expected private consumption.

Among major industries, the agriculture sector grew 4.9 percent in the first quarter after contracting by 1.3 percent in the fourth quarter last year. The growth of the industry, however, slowed down to 6.1 percent from 7.9 percent while services eased to 6.8 percent from 7.2 percent.

The services sector was the biggest contributor to GDP with 3.8 percent followed by industry with 2.1 percent and the agricultural sector chipped in 0.5 percent.

Economic managers penned a GDP growth of between 6.5 and 7.5 percent this year after the expansion accelerated to 6.9 percent last year from 5.9 percent in 2015 as election related spending boosted private consumption and investments.

Source: http://www.philstar.com/business/2017/06/05/1706709/factory-growth-seen-6-next-2-years