Philippine exporters urged to access non-traditional export markets

The National Economic and Development Authority (NEDA) has urged Philippine exporters to refocus their strategies particularly accessing the non-traditional export markets as exports remained weak.

Economic Planning Secretary Ernesto Pernia expects export growth to remain muted for the rest of 2016 with the slow recovery of the global economy.

Pernia urged exporters to consider exporting to European countries. Exports to France and Switzerland grew by 37.8 percent and 72.0 percent, respectively, for the first five months of 2016.

Exports declined by 3.8 percent year-on-year in May 2016 to US$4.7 billion as export of all commodity groups slowed down.

Exports of agro-based products fell by 29.4 percent, mineral products by 13.6 percent, manufactures by 0.5 percent, forest products by 82.6 percent, and petroleum products by 33.4 percent. However, this is a noticeable easing off since the 15.1-percent decline in March 2016.

On the other hand, exports to traditional markets such as Germany and the Netherlands declined by 18.8 percent and 10.6 percent.

Pernia stressed the importance of increasing the flexibility of export firms to cater to the domestic market, given robust domestic demand.

“We also need to keep government spending on track to ensure that domestic demand continues to provide a cushion to mitigate the impact of the country’s weak exports growth,” said Pernia.

In terms of export markets, Japan (22.1%) remains on top in May 2016 with exports growing by 1.5 percent for the month and averaging 1.3 percent for the first five months.

Among seven selected Asian economies, only Vietnam posted positive export growth of 4.9 percent in May 2016, although lower than the previous month’s 7.5 percent.

Weak global prospects to impact manufacturing sector

The Philippine government has warned of subdued global economic prospects, weaker-than-expected economic performance of major trading partners, and weather shocks such as La Niña and typhoons that would impact the manufacturing sector’s growth.

Economic Planning Secretary Ernesto Pernia stressed the need for the government to provide adequate, sustainable and reliable infrastructure and the capacity of small-scale industries must be further enhanced by strengthened linkages with large corporations and through knowledge and technology transfer.

“Public and private investments in research and development activities must be encouraged. Engagement in high technology endeavors, as well as attracting foreign direct investments, will be influential to paving the way for the much needed blossoming of high-tech manufacturing sub-sectors in the country,” Pernia said.

The country’s manufacturing output declined in May,owing to a significant drop in leather, chemical, and petroleum products production.

The Philippine Statistics Authority’s monthly integrated survey of selected Industries in May 2016 revealed that the volume of production index (VoPI) declined by 1.2 percent, close to  to the 1.1 percent decline in the same period last year.

Similarly, the Value of Production Index (VaPI) declined by 4.9 percent, although slower than last year’s 8.0 percent reduction.

“This drop in manufacturing production is the first for 2016. As business sentiment remains optimistic and supported by stable consumer confidence, industrial output is expected to improve towards the end of the second quarter,” said Pernia.

Pernia expects the manufacturing sector to benefit from the economic agenda of the current administration, particularly on increasing competitiveness, easing business processes, accelerating infrastructure spending, and attracting foreign direct investment.

High levels of inventories in leather goods, drugs, and medicines posted at the beginning of the year continue to meet the demand for these products, resulting in a production slowdown.

The volume and value of production in petroleum continued to decline, but at a slower pace due to higher demand for diesel from Europe and lower supply of oil from the US.

 

ADB supports Philippine economic agenda

The Asian Development Bank (ADB) has expressed support for the Philippine government’s 10-point economic agenda and affirmed ADB’s strong partnership for promoting sustainable economic growth, reducing poverty, and improving the welfare and livelihoods of Filipinos.

ADB President Takehiko said the recent strong growth of the Philippines provides a foundation for further sustainable growth to fully realize this country’s enormous potential.

“Our support will be tailored to the government’s socio-economic and poverty reduction priorities, and to the country’s middle-income status. We are looking forward to further discussions on how we can best support the country.”

The Philippines has experienced strong economic growth in recent years. Gross domestic product growth was 5.9% in 2015, and is expected to rise to 6% in 2016 and 6.1% in 2017, due primarily to higher private consumption and investment. Unemployment is hovering at historical lows of 6.1% as of April 2016. But challenges remain to create better jobs and reduce underemployment especially in rural areas.

Nakao commended President Rodrigo Duterte’s administration’s aim of spreading the benefits of strong growth. The Philippines can harness its vast potential by tapping its young and educated population in pursuit of higher productivity and job creation, especially in such areas as small- and medium-enterprises, tourism and agri-business.

Based on the government’s prospective development plans, ADB is prepared to support areas such as accelerating infrastructure development with special attention to the role of public-private partnerships, rural and value chain development in agriculture, improving human capital investment including health and education and social protection through conditional cash transfers.

Nakao emphasized that ADB can help the Philippines to incorporate innovations in infrastructure development, based on ADB’s extensive experience in countries and access to global knowledge and advanced technologies.

He reiterated ADB’s commitment to supporting the government’s efforts to bring lasting peace and development to Mindanao. ADB is actively working with local authorities to prepare the Mindanao Development Program, and on various projects to develop road infrastructure. These include the upgrading of national roads in central, southern and western Mindanao, which will improve the area’s linkages with national and regional markets.

ADB provided its first loan in the Philippines in 1969 to support private enterprise development, followed by a loan to support agriculture and rural development in Mindanao. Since then, it has provided $15.9 billion in sovereign loans, $1 billion in non-sovereign operations (loans, equity investment, and guarantees to the private sector), and $93 million in technical assistance. In the aftermath of Typhoon Haiyan (Yolanda) in 2013, ADB provided $900 million for typhoon-affected areas.

ADB is targeting a record of more than $1 billion of approved sovereign loans in 2016, and is ready to increase assistance further based on discussion with the new administration.