PH factory output growth slowed in 2024

FILE PHOTO: Workers sort Cavendish bananas for export in a packing plant of Marsman Drysdale Agricultural Group in Davao del Norte in this photo taken before the pandemic. —MARSMAN DRYSDALE AGRICULTURAL GROUP

Local factory output growth eased in 2024, with the sector unable to squeeze out a solid expansion during the holiday season as manufacturers grappled with supply problems and subdued demand at home and abroad.

A monthly survey of selected industries showed manufacturing output, as measured by the volume of production index (VoPI), grew by 0.9 percent year-on-year in 2024, easing from the 4.9-percent expansion in 2023, the Philippine Statistics Authority (PSA) reported on Friday.

In December, when demand usually spikes leading to increased production, factory output grew by a measly 0.2 percent.

It was nevertheless a reversal from the 3.9-percent contraction in November.

Given the modest output growth, data showed factories only utilized 75.5 percent of their capacity on average, slightly lower than the 75.7-percent utilization rate in the previous month.

John Paolo Rivera, senior research fellow at Philippine Institute for Development Studies (PIDS), a state-run think tank, said the support from the holiday season was not as strong as expected.

Food production

“The significant slowdown in VoPI reflects persistent challenges in the local manufacturing sector, including weak external demand, high borrowing costs and lingering supply chain constraints,” Rivera said.

“The global economic slowdown, particularly in major export markets like China and the United States, may have weighed on the export-oriented manufacturing subsectors,” he added.

Data showed the VoPI for finished food products that came out of factories contracted at a faster rate of 1.7 percent in December compared to the 0.9-percent decline in November.

What pulled down food production in the final month of 2024 was the slump in processing and preserving of fruits and vegetables following the onslaught of typhoons late last year that created supply woes. Manufacture of dairy products and animal feeds also took a hit.

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As it is, food was one of the six industries that had posted negative output growth in December, with production of basic metals (-19.4 percent) and tobacco products (-18 percent) registering the largest declines.

It was the 16 other sectors that had posted positive growth that brought the overall VoPI back to the positive territory, figures showed. The gainers were led by producers of electronic products (+4.3 percent), coke and refined petroleum products (+4.4 percent) and transport equipment (+6.1 percent).

Moving forward, Rivera of PIDS believed that the ongoing rate-cutting cycle of the Bangko Sentral ng Pilipinas (BSP) would keep factory machines humming this year.

“If the BSP begins cutting interest rates, borrowing costs for businesses could ease, supporting capital investment and production growth,” he said.

“Overall, the manufacturing sector is expected to recover moderately in 2025, but sustained improvement will depend on interest rate cuts, global trade conditions and domestic demand growth,” he added.