THE country’s manufacturing sector could post a double-digit growth if inflation further eases, an economist said on Friday.
“Manufacturing growth has been lingering at single-digit levels in recent months [as] higher inflation and higher interest rates since 2022 dragged manufacturing activities,” Michael Ricafort, chief economist at Rizal Commercial Banking Corp., told the Philippine News Agency in a Viber message.
GOOD NEWS. The Philippine gross domestic product (GDP) growth could expand by 6.5 percent to 7 percent in the October-December period, according to economist Michael Ricarfort (left) during a media forum in Quezon City on Saturday (Nov. 11, 2023). At the same time, Ricafort is optimistic that the unemployment rate of 4.4 percent in September would decline by the fourth quarter, owing to the usual high demand for services when the Christmas season approaches. (PNA photo by Robert Oswald P. Alfiler)
Latest data from the Philippine Statistics Authority shows that manufacturing output both in volume and value continued to grow in September this year.
The value of production index grew by 8.9 percent, while the volume of production index also expanded by 9.1 percent.
Ricafort said a double-digit growth in manufacturing is possible, given the further reopening and recovery of many businesses, such as tourism and other hard-hit industries during the pandemic.
“Manufacturing growth could also post double-digit growth rates again once inflation eases further and eventually the Fed (US Federal Reserve), and other global and local central banks start to cut rates, especially later in 2024, provided that geopolitical risks do not widen further, especially the Israel-Hamas war,” he said.
To temper the rising inflation, the Bangko Sentral ng Pilipinas has so far raised interest rates by a total of 450 basis points since last year.
Inflation, which accelerated to 6.1 percent in September, decelerated to 4.9 percent last month.
Ricafort said lower interest rates would help boost investment and manufacturing activities, as well as generate more jobs and other economic activities.
“Further growth in manufacturing [is] also structurally a function of more net foreign direct investment inflows into the country amid various investment commitments from overseas trips of the administration since the latter part of 2022,” he said.