PHILIPPINE manufacturing conditions are not expected to be worsen for the rest of 2026, but manufacturers are putting expansion plans on hold, according to Federation of Philippine Industries (FPI) Chairman Elizabeth Lee.
The industry leader said Purchasing Managers’ Index (PMI) results are a litmus test of what will happen in the industry in the next couple of months.
The country’s PMI fell into contraction territory in September after four months of expansion and a near-decade high in August. October results will be released by S&P Global on Tuesday.
Looking ahead into 2027, Lee said manufacturers were putting expansion plans on the shelf for the time being. She added that the current priority for manufacturers was simply to sustain and maintain their operations.
“It’s not easy to shut down,” she said. “What I mean by that is that manufacturers are always looking at the long term. So, as much as possible, even if it bleeds, we will support it.”
Despite putting expansion on hold, she said manufacturers were focused on holding on to their existing workers as much as possible due to the significant equity and training already invested in them.
Lee emphasized that the government must properly spend its budget on infrastructure to support recovery and growth. She explained that infrastructure spending was critical because it employed people and gave them purchasing power; when these people buy manufactured goods, they circulate money back into the economy.
She also called for the government to help businesses mitigate the high electricity costs, which is vital to keeping factories running.
Aside from these, she emphasized that rebuilding investor and business confidence would be crucial to attracting investments over competitors like Vietnam. Doing so requires addressing corruption, ensuring transparency, and improving the ease of paying taxes.
Lee said the fall in the September PMI was expected. She also noted that local manufacturing is not projected to be too bad for the rest of the year.
She explained that manufacturers have already ordered inventories ahead for sales in the coming months, particularly anticipating Christmas and holiday spending, as well as remittances from overseas Filipino workers.
However, she said this relatively stable outlook remains contingent on the war in the Middle East not escalating further.
Lee said manufacturers are experiencing a severe margin squeeze. Inputs cost significantly more given the depreciating peso and the Philippines importing its manufacturing needs. However, manufacturers cannot pass the entirety of these rising costs down the line to consumers to avoid worsening demand destruction.
To survive amid the fast-depreciating peso, manufacturers are actively hedging in the negotiations of their contracts with suppliers. Some manufacturers have adopted an assumption of 65 pesos to the dollar.
“You know why we’re doing that already? It’s because you don’t know how fast [the depreciation will be],” she said.
She noted that for manufacturers, the primary impact of rising fuel prices is felt through increased logistics and trucking costs, rather than direct fuel use.
