Household spending seen to continue uptick

By Jenina P. Ibañez, Reporter

PHILIPPINE HOUSEHOLD CONSUMPTION could see sustained improvement in the near term amid slowing daily coronavirus disease 2019 (COVID-19) infection rates, Moody’s Analytics said.

The economic research firm noted the effects of mobility restrictions declared to curb the spread of COVID-19 in the country, with extended Metro Manila restrictions in the third quarter hurting household spending and broader domestic demand.

“In the near term, we expect to see a more sustained improvement in household consumption as daily infection rates have slowed,” Moody’s Analytics Senior Asia-Pacific Economist Katrina Ell said in an e-mail last week.

The Health department reported 3,410 new COVID-19 cases, bringing the active caseload to 45,233 as of Sunday.

“That being said, vaccination coverage of the population needs to increase further to reduce the likelihood of further aggressive movement controls needing to be introduced,” she added.

According to the Johns Hopkins University Coronavirus Resource Center, the Philippines has fully vaccinated 26.8 million out of its 110 million population as vaccine supply constraints eased.

Household spending in the Philippines grew 7.2% year on year in the second quarter of 2021, after declining by 15.3% in the same period last year. In 2020, household consumption fell by 8.3% amid prolonged lockdowns. Household spending accounts for 70% of the country’s economy.

The country’s GDP grew by 11.8% in the second quarter this year, a reversal from the record 17% contraction seen in the same three-month period last year.

Moody’s Analytics earlier said consumer sentiment in the Asia-Pacific has followed the success of their countries’ policy makers in managing the virus.

“Our expectation is that COVID-19 will continue to influence economic behavior, but each successive new infection wave or variant will make a smaller dent (in) economies,” it said.

Meanwhile, Fitch Solutions Country Risk and Industry Research in a report on Friday said household spending could grow by 5.1% or a total of P11.1 trillion in 2022, accelerating from the estimated 3.5% growth this year, as the employment rate and consumer sentiment improve.

“Over 2022, consumer spending growth will begin to moderate, as the Filipino consumer continues its recovery from the contraction in 2020,” Fitch Solutions said.

The Philippine Retailers Association earlier said eased lockdown restrictions in Metro Manila will start to bring more consumption, noting that more transportation availability will improve consumer traffic.

But consumption could still be tempered. ANZ Research in an Oct. 14 note said the scale of pent-up demand in the Philippines, Indonesia, and Thailand “could disappoint” as it points to a decline in household savings rates and incomes.

“For the Philippines, the proportion of households with savings has dropped remarkably. The situation is likely to have been aggravated by the slowdown in remittances from overseas workers. Encouragingly, this headwind has started to abate recently,” ANZ Research said.

“The Philippines stands out with more than a quarter of its labor force un/underemployed for six straight quarters.”