CHEAP oil augurs well to domestic manufacturing even as it puts jobs of millions of Filipinos working in oil-producing countries at risk, according to the Department of Finance’s chief economist.
“The slumping oil price may continue for quite some time and enable local producers to produce more goods at a lower cost,” Finance Undersecretary Gil S. Beltran said in an economic bulletin last week, noting that the producer price index, which measures manufacturers’ costs, declined by 7 percent in November last year.
The latest government data showed that imports jumped 10.1 percent to $6.1 billion last November, bringing the import bill for the first 11 months of 2015 up by 4.5 percent to $62.6 billion.
The National Economic and Development Authority (Neda) had attributed the strong end-November import performance to higher purchases of capital goods, consumer products as well as intermediate goods and raw materials.
“The robust import growth of intermediate goods and capital equipment indicate that local firms are taking advantage of robust domestic demand by utilizing to the maximum their rated capacities and are expanding these further with new equipment purchases,” Beltran noted.
In this regard, “the government can ride on this wave of optimism by promoting the country as an investment site in international roadshows,” the finance official said.
Generating more employment opportunities locally would compensate for potential job losses in overseas Filipino workers’ (OFWs) destinations hurting due to the drop in oil prices, Beltran said.
For Beltran, improving the ease of doing business to attract more investors “will enable the country to create more jobs and ease the impact of the possible return of 2.3 million OFWs in the Middle East that may be affected by political turmoil and massive decline in petroleum prices.”
The Department of Energy agreed that while it was a boon to motorists, the continuing decline in oil prices was a cause for concern because further reductions could discourage investment in oil exploration and affect Filipino workers based in oil-producing countries.
“I am not completely happy [with the oil price decline] because, for one, prices of commodities and services that are supposedly benchmarked on oil prices such as goods and transport fares are not coming down as much as oil prices. But pump prices are going down, benefitting those with vehicles,” Energy Secretary Zenaida Monsada said in an interview.
The other side of the low oil price scenario is that oil exploration and development companies are more cautious about investing, which could leave nontraditional areas such as the Philippines even less attractive to those investors.
Another undesirable impact of the continuing decline in oil prices was that Filipino workers in oil-producing countries could get laid off, which would affect their families in the Philippines, Monsada said.