Moody’s Investors Service is upbeat about manufacturing output in the Philippines, citing nascent growth in the sector resulting from rising investments.
“Rising local and foreign investments, and better manufacturing production are helping to drive output higher, aided by solid local demand from consumers,” Moody’s said in a recently published outlook report for the Asia-Pacific.
Substantiating its favorable sentiment, the international debt rating firm said it expects industrial production in the Philippines to have grown year on year by 8 percent in January (official data are scheduled to be released by the National Statistics Office on March 12).
In the same month last year, growth in the value of industrial production was registered at 2.6 percent.
“The industrial production series is volatile but, looking through the noise, production has been steadily accelerating since around mid-2012,” Moody’s said.
The comments of the credit watchdog are consistent with observations of economists about early signs of an improving manufacturing sector in the Philippines.
While the services sector, led by the rapidly expanding business process outsourcing (BPO) companies, have largely driven growth of the Philippine economy in the last few years, the industrial sector had substantially improved in 2012.
The industrial sector grew by 6.5 percent last year, significantly accelerating from the growth of 2.3 percent in 2011.
The government said growth in industries last year was due to rising investments, which were aided by robust household consumption and the encouraging outlook on the Philippine economy.
The Philippine economy grew by 6.6 percent last year, posting one of the fastest growth rates in Asia during the period.
Given its favorable performance last year—during which advanced economies continued to struggle with serious debt problems—the Philippines has been recognized for being resilient. In 2009, the Philippines was likewise cited for avoiding a recession when most advanced economies contracted.
Economists said, however, that the Philippines continues to face the challenge of making the benefits of a growing economy translate into poverty reduction. So far, they said, the middle class and the rich are the ones mostly reaping the benefits of a growing economy.
For the Philippines to trim the significant poverty incidence in the country, they said, growing investments in the manufacturing sector should be sustained for the medium to long term.
Unlike a growing services sector, economists said, an expanding manufacturing sector is more capable of helping reduce poverty. This is because the manufacturing sector offers employment even to those with relatively lower levels of educational attainment.