In its Philippine economic update for September, the World Bank said with an average capacity utilization rate of 84 percent as of July, Philippine factories are already operating near full capacity. However, the capacity utilization rate barely moved since 2012. Wikimedia Commons
MANILA, Philippines – The manufacturing sector remains on a strong growth trajectory but has barely increased capacity limits, the World Bank said in a report.
In its Philippine economic update for September, the multilateral lending institution said with an average capacity utilization rate of 84 percent as of July, Philippine factories are already operating near full capacity. However, the capacity utilization rate barely moved since 2012.
In July, 11 out of 20 major industries operated at capacity rates of 80 percent and above. These were basic metals, petroleum products, non-metallic mineral products, machinery except electrical, food manufacturing, electrical machinery, chemical products, paper and paper products, rubber and plastic products, wood and wood products and printing.
“Unless businesses actively invest in expanding production capacities, capacity constraints may limit growth prospects in the near future,” World Bank said.
The manufacturing sector grew 10 percent in July mainly due to the expansion in the production of basic metals, transport equipment, rubber and plastic products, machinery, wood and wood products and tobacco products.
Factory output, as measured by the Volume of Production Index (VoPi), rose 10.1 percent in July 2016, significantly faster than the growth rate of 0.1 percent in the same month last year. Production value, as measured by the Value of production Index (VaPI), grew 5.6 percent, reversing its negative growth of 6.6 percent in the comparative period last year.
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The Nikkei ASEAN Manufacturing purchasing managers’ index (PMI) for the Philippines also registered a strong reading of 55.3 in August. A PMI reading of above 50 points indicates improved business conditions while a score below 50 indicates the opposite. World Bank said this suggests “solid prospects for the manufacturing sector through the next quarter.
The National Economic and Development Authority (NEDA) has warned of slowdown in industrial activity in the third quarter of the year due to seasonal factors such as interruption of business during the rainy season, planting and closed milling season, and closed season for fishing activities in the Davao Gulf from July to September.
World Bank said, however, the strong growth in the importation of capital goods “could result in new production capacity in the industry and services sectors.”
