THE INDUSTRY OF THE PHILIPPINES sector is still not active full capacity, Pantheon Macrosaid the economy, although this has helped dampen price pressures.
“Underlying price pressures in the Philippine economy remain contained in more ways than one. One important aspect is the fact that heavy industry is still operating below ‘normal’ capacity,” Miguel Chanco, head of emerging economies at Pantheon Macroeconomics, said in a report.
The latest data from the Bangko Sentral ng Pilipinas’ (BSP) Business Expectations Survey shows that the average occupancy rate of the industrial and construction sectors fell to 71.9% in the third quarter, down from 72% a quarter earlier.
“This is still below the historical average of 73.3%, a benchmark that has yet to be achieved in the post-pandemic period,” Mr Chanco said.
Based on available data, he said occupancy rates hit a low of 66.8% in the third quarter of 2020.
“This pace has since declined and moved largely sideways, indicating that the current pace of growth in the construction and industrial sectors still does not pose a real fundamental threat to inflation,” Mr Chanco said.
Philippine headline inflation slowed sharply from 3.3% in August to 1.9% in September. This was also the slowest print in more than four years or since the 1.6% clip in May 2020.
In the first nine months head onFInterest rates averaged 3.4%, in line with the central bank’s annual forecast and within the annual target of 2-4%.
“The prospects for construction look bleak; The catch-up from the COVID-19 crisis has been exhausted – it likely ended in the third quarter as construction expenditure in national accounts reached 98.7% of its pre-pandemic peak in the second quarter,” he added.
The Philippine gross domestic product (GDP) grew at an annual rate of 6.3% from April to June, the fastest in recent years. Ffive quarters or since 6.4% in the Fthe first quarter of 2023, according to the latest data from the Philippine Statistics Authority (PSA).
This was faster than the revised growth of 5.8% in the first quarter and 4.3% in the second quarter of 2023.
Among the top contributors to GDP growth in the second quarter were construction (16%); wholesale and retail trade, repair of motor vehicles and motorcycles (5.8%), and financial and insurance activities (8.2%).
Gross capital formation, the investment component of the economy, grew 11.5% in the second quarter, faster than growth of 0.5% in the previous quarter and 0.7% a year ago.
Public construction grew 21.8% in the second quarter, faster than the 12.1% a year ago, as the government ramped up infrastructure and rehabilitation projects. Private construction also rose 9.9%, faster than 5.3% a year ago, while commercial construction increased 13.6%.
Meanwhile, PSA data showed applications for building permits fell 2.4% to 14,343 in July, compared to 14,689 a year ago.
“Overall, business investment plans, while gradually increasing, remain historically subdued. And their post-COVID-19 recovery remains disappointing, at least when compared to the last rebound after the global financial crisis,” Mr Chanco added.
BSP data showed that business confidence in the construction sector was more optimistic in the third quarter of this year, against the backdrop of new customers and contracts.Fand more business opportunities and potential expansions.
However, business sentiment for the fourth quarter was “less buoyant” due to expectations of a lack of new customers and fewer projects.
“The share of companies planning to expand next quarter rose to a new post-pandemic high of 21.7%, the same as in the third quarter, according to our seasonal adjustment and annualized to smooth quarter-on-quarter volatility,” said Mr Chanco said.
“Keeping this in perspective, it is still only 69% of end-2019 levels, a recovery rate that would drop to 61% when measured against the pre-pandemic record of the year before.” — Luisa Maria Jacinta C. Jocson