MANILA, Philippines – Global oil prices are likely to hit $20 a barrel soon and the government said this should benefit the country’s manufacturing sector.
In a research note, Nicholas Antonio Mapa, economist and research officer at the Bank of the Philippine Islands, said tumbling oil prices have not reached their floor yet.
“Oil may very well hit $20 (a) barrel in the next few weeks,” Mapa said.
Oil continued its slump in the new year after a more than 40 percent decline in 2015. Dubai crude, the benchmark for Asian importers, dropped to $34.70 a barrel by Dec. 31 from previous year’s $60.39.
Brent crude, meanwhile, closed at $30.44 on Thursday in European trading, earlier touching the $20-level.
In a separate economic bulletin, Finance Undersecretary and chief economist Gil Beltran said the current phenomenon is beneficial for the continued growth of the manufacturing sector.
“The continued decline in oil prices allows local firms to produce more goods at lower cost of production. This will compensate for losses in the export sector,” he said.
Coupled with ample state support in infrastructure, Beltran said cheap oil would allow the volume of production index to sustain its growth trajectory, which strengthened in November to 7.5 percent.
The growth rate that month was higher than the 1.7 percent recorded in October, although was slower than the 9.1 percent the previous year.
“The continuation of PPP (public-private partnership) especially on infrastructure and road projects is vital to boost the domestic economy,” Beltran said.
“With the continued slump in global economy and decline in export industry, the government should continue encouraging foreign and local investors to set up businesses in the country,” he said.
Exports have contracted for 10 of the first 11 months last year as weak demand from other countries pushes down commodity prices.
To cope with this, Beltran said manufacturers should move up the value added chain and produce new and competitive products.