THE implementation of enhanced community quarantine (ECQ) may have tempered some of the gains by the manufacturing sector, which has been showing signs of recovery recently.
Ser Percival K. Peña-Reyes, Ateneo Center for Economic Research and Development (ACERD) associate director, said in a webinar on Wednesday that imposing the strictest form of community quarantine in the National Capital Region (NCR) hurt the industry as it is a major manufacturing hub, along with Calabarzon area.
“The strength of the recovery of manufacturing production will most likely be curtailed in August because of the heightened quarantine restrictions imposed on major manufacturing centers of the country such as the NCR and Calabarzon,” Peña-Reyes explained.
“When these areas got locked down, it affected our entire country’s performance. It is easily three-fifths of the economic activity concentrated here,” he added.
NCR is under ECQ from August 6 to 20 amid the threats of the Covid-19 Delta variant.
While the mobility restrictions have thrown a wrench to the manufacturing operations, the ACERD economist said the sector is already showing signs of recovery.
Peña-Reyes stressed, however, that a return to pre-pandemic level may take some time. “We cannot reasonably expect…things to go around in just one year. It will take quite a while, maybe two or three years,” he said.
For example, he cited the improved value and volume of production on certain items in June. These include food products; coke and refined petroleum products; basic metals; and electrical equipment. The ACERD official tagged these as the “most promising manufacturing industries” given the demand.
The capacity utilization rate for manufacturing also showed a U-shaped recovery, he added.
“The gradual reopening of the economy that came with less restrictive quarantine restrictions has revitalized demand and motivated greater production,” he explained. “Many producers are priming themselves to quickly respond to stronger future demand (forward-looking expectation) by building up their inventories.”
Meanwhile, Peña-Reyes noted that the producer price index for manufacturing is still below the pre-pandemic level. “There’s perhaps less pressure on the demand side, which presumably would also spillover to the supply side,” he said.
He added that the manufacturing sector can aid in the recovery of agriculture and services sectors if the pandemic response improves the Covid-19 situation in the coming months.
Based on the latest quarantine guidelines, manufacturers of medicines and vitamins, medical supplies, devices and equipment, including suppliers of input, packaging and distribution are allowed 100-percent capacity during ECQ. Manufacturing related to food, beverage and other essential goods; and products for construction and maintenance works are also allowed to fully operate during ECQ.
However, the government banned other manufacturing activities during ECQ. These include electrical machinery, wood products and furniture, non-metallic products, textiles and wearing apparels, paper and paper products, rubber and plastic products, coke and refined petroleum products, other non-metallic mineral products, computer, electronic and optical products, electrical equipment, machinery and equipment, motor vehicles, trailers and semi-trailers and other transport equipment.
‘Buy local’
To boost the manufacturing sector, ACERD Director Cielito F. Habito encouraged the consumers to buy local products instead of imported items.
“Patronize products of your small community enterprises,” Habito said in the same webinar.
He said that spending on domestic products will have a multiplier effect for the local industry, thus benefitting the economy.
On the other hand, the ACERD director called on the government to assist small businesses so they can retain their current workforce despite the challenges brought about by the pandemic.
He cited government subsidies for costs related to safety protocol measures, Covid-19 tests for employees and vaccines.
In addition, Habito asked to ease red tape and documentary requirements; and provide tax relief for the struggling businesses.
The Department of Trade and Industry recently reported that the number of micro, small and medium enterprises that shutdown increased to 16 percent during ECQ from 8-10 percent. The department said the closures were due to depleted cash flows amid the restrictions.
Read full article on BusinessMirror
