MANUFACTURING CONTRACTION SLOWS: Sales revenue dips despite eased lockdowns

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    Despite the easing of the community quarantine measures in the middle of the year, firms in the Philippines reported a deep reduction in sales revenue in July, a survey conducted by the World Bank (WB), in collaboration with the Department of Finance and National Economic Development Authority showed.

    This developed as the Philippine Statistics Authority (PSA) reported manufacturing output contracted at a slower rate in August.

    The results from the Philippines coronavirus disease 2019 (COVID-19) Firm Survey by the World Bank conducted in July 2020 showed that during the said month, 40 percent of firms reported the temporary suspension of their operations, 20 percent of which by government mandate and 20 percent voluntarily. Meanwhile, about 15 percent of firms reported to have closed permanently.

    “This indicates that COVID-19 community quarantine measures had a significant temporary and permanent impact on firms’ operations,” the report said.

    The results showed reported sales revenue dropped by 64 percent on average between April and July 2020, with 89 percent of firms reporting a continued reduction in sales.

    “This was in addition to already significant loss by 65 percent experienced in March 2020 compared to February 2020, with 75 percent of firms reporting reduction in sales,” the World Bank said.

    The findings are based on the survey of 74,031 firms carried out between July 7 to 14, 2020, to assess the COVID-19 impact on firms’ activities.

    The World Bank said this survey builds on a large-scale government survey in April 2020, both of which benefit from a large sample size and present a nationwide representative snapshot of the activities of firms in the Philippines.

    The report said the negative impact on employment is also extensive as one out of two firms reported having reduced payments to employees.

    “Close to half, or 48 percent of firms reported that they reduced the number of their employees, while the rest maintained the level of employment with only one percent reporting new employment,” the World Bank said.

    The survey also revealed that almost two-thirds of firms turned to digital solutions for sales, marketing and payment methods to adapt to the new normal.

    Meanwhile the report said firms expressed a high degree of uncertainty and general pessimism about their operations, sales and employees for the next three months.

    Meanwhile, PSA data showed the Volume of Production Index (VOPI) for the manufacturing sector in August 2020 declined at a slower rate of 9.9 percent, compared with the 14.6 percent decrease in July 2020.

    In August of the previous year, year-on-year decline was 12.5 percent.

    The PSA said the slower downtrend in the VoPI for the sector was influenced by the increases in the indices of two heavily weighted industry groups, namely, chemical products (17.1 percent), and basic metals (3.9 percent).

    “Contributing further to the slower drop in August 2020 for the sector was the slower decreases in the indices of nine industry groups,” the PSA said.

    The PSA also reported that the Value of Production Index for manufacturing continued to drop at an annual rate of 13.8 percent in August 2020.

    This decline, however, was slower than the reported annual decrease of 17.2 percent in the previous month. In August 2019, it dropped at a slower rate of 11.2 percent.