HOUSEHOLD SPENDING will decline by 7.8% this year with consumption expected to remain muted over the remainder of 2020, failing to recover to its pre-pandemic levels even when lockdown restrictions ease, according to Fitch Solutions Country Risk and Industry Research.
“We now forecast household consumption growth to come in at -7.8% in 2020, before a gradual rebound to 5.5% in 2021,” Michael Langham, Senior Asia Country Risk Analyst for Fitch Solutions, said in an e-mail. The analysis factors in the two-week reversion to modified enhanced community quarantine in Metro Manila and nearby provinces.
This latest estimate reverses the 3.4% household spending growth outlook it issued in May.
“The pandemic and related economic shock has hit households through several channels: a deteriorating labor market, weaker remittances, (and) a confidence shock, which will prompt higher savings rates,” Mr. Langham said.
He added willingness to consume will be dampened over the coming quarters.
Travel mobility, shopping, and recreation were down by an average of 53.6%, Fitch Solutions said in a note Thursday, citing data from Google. Mobility to essential stores like groceries and pharmacies also declined by an average of 23.5% between June 1 and July 19, when restrictions were gradually eased.
“This suggests that significant demand-side risks still exist in the country and many consumers are still not returning to pre-COVID-19 retail,” Fitch Solutions said.
It said spending patterns have been disrupted with the most exposed categories thought to be cosmetics and hospitality.
Temperature checks, queues, and social distancing are also expected to diminish the appeal of shopping and dining out, thereby affecting consumption related to fashion, homeware, and food services.
“While in the short term it will take time for consumers to adapt to the new normal, the easing of lockdown restrictions is good news for the country’s economy,” it said. — Luz Wendy T. Noble