The Market Monitor Minding the Nation's Business
A noted economist pronounced grim prospects for the economy next year, with exports receipts continuing to fall and El Niño feared to vastly reduce agricultural output.
Export receipts fell by 10.8 percent in October because of persistent sluggish external demand, according to the National Economic and Development Authority (Neda).
The Philippine Statistics Authority (PSA) reported that merchandise exports fell to $4.6 billion, also in October, from $5.1 billion a year ago.
Prof. Benjamin Diokno of the University of the Philippines (UP) School of Economics (UPSE) said that, with a weakening world economy, it would be hard to think of a scenario where the country’s year-to-date exports decline of 6.2 percent would be reversed.
“Exports have been in the red in nine of the first 10 months of 2015. In May and September, exports plummeted by 17.4 percent and 15.5 percent, respectively,” the economist said.
Diokno also said his full-year exports growth forecast for 2015 is a contraction of 6 percent.
Socioeconomic Planning Secretary Arsenio Balisacan said the lingering sluggish global demand, the slack in industrial activity in the United States and the recent economic adjustments in China have weighed down on the country’s exports.
“Exports performance in the succeeding months is also anticipated to remain weak, given the slowdown in the economic growth of the country’s major trading partners,” Balisacan added.
Eleven key commodities registered drops in exports for October, particularly manufactured goods, agro-based products, mineral products, and petroleum products.
Manufactured goods, which made up 88.5 percent of the country’s total merchandise exports for October, declined by 5.1 percent. They fell to $4.1 billion from $4.3 billion in October 2014.
The weak exports figures and effects of El Niño were also reflected in the slowdown in the output of the manufacturing sector in October.
The government’s Monthly Integrated Survey of Selected Industries for September showed the manufacturing sector’s volume of production index falling by 1.8 percent, while the value of production index also continued to fall at 9.2 percent after shrinking a slower 4.8 percent in September 2015.
“For the months and years ahead, the government expects the manufacturing sector to exhibit stronger growth,” Balisacan said.
“For this holiday season, driven by strong domestic demand, business firms are expected to increase production output in anticipation of brisker business activities. This will translate to higher volume of sales and possible expansion of businesses and new product lines,” he added.
The Volume of Net Sales Index (VoNSI) and Value of Net Sales Index (VaNSI) posted steep declines of 5.8 percent and 12.9 percent, respectively.
Diokno said the dismal outlook is seen to spill over next year, with El Niño continuing until the end of the second quarter, the rising security concern, and the lukewarm global market.
“The government forecasts a feel-good exports growth of 12 percent. But realistically, I think exports growth is going to be flattish,” he said.
Structural and economic adjustments in China have also affected the country’s export performance, with revenue losses dragging down exports growth for October. From January to October, export revenues to China contracted year-on-year by 24.7 percent.
“As the global economy remains fragile, export-oriented firms in the Philippines should recalibrate their production and marketing processes to serve the domestic market,” the Cabinet official said.
Balisacan also stressed the need to collaborate with the private sector in order to facilitate the marketing of export products to the domestic market.
“We remain positive, as substantial improvement in Japan’s industrial sector may partially offset the downward pull from weakness in the US and China in the coming months,” he said. “There is strong international demand for Japanese products and this will be a major factor in sustaining robust industrial growth.”
Balisacan also underscored the need to tap the potential of the services sector, specifically tourism, indicating an expected surge of demand for services related to recreation and travel.
“Several manufacturing firms are also considering relocating to emerging economies. Thus, the country should take advantage of this opportunity by improving its competitiveness as an investment destination,” he said.
Balisacan also said the food subsector continued to decline in both value and volume of net sales due to the persistent dry spell spawned by El Niño and the devastation brought about by three typhoons in the third quarter.
“To support brisk economic activity for the coming months and years ahead, the government must continue to invest in infrastructure and logistics support to minimize barriers to the smooth flow of goods,” Balisacan said.
He added that the manufacturing sector must aggressively pursue innovation to remain competitive in the domestic market, while maintaining global presence to offset large losses from the economic slowdown in China.
“More important, we need to ensure the full completion and implementation of the Comprehensive National Industrial Strategy to strengthen the linkages across all production sectors that will sustain growth and the resiliency of the economy despite external and internal shocks,” the secretary said.