Consumer spending seen slowing — Fitch

‘Our forecast for real consumer spending in the Philippines is in line with our Country Risk team’s forecast that the Philippines’s real GDP growth will decelerate from an estimated 7.4 percent (year-on-year) in 2022 to 5.9 percent (year-on-year) in 2023.’

Fitch Solutions on Tuesday said household spending in the Philippines would slow down by 5.5 percent year-on-year, down from the 8.2 percent growth forecast in 2022.

In an emailed commentary, Fitch Solutions said it expects the consumer spending growth in the Philippines to settle to an average of 5.1 percent per year over the rest of the forecast period.

Consumer confidence has increased since its all-time low, Fitch Solutions said. However, the US think tank said that consumer confidence in the Philippines has also remained negative.

Fitch Solutions added that retail sales increases have “remained sluggish” since the pandemic but are starting to show signs of improvement.

“While unemployment has fallen to a record low, cost of living remains elevated,” the US think tank said.

“We predict inflation to ease over 2023; however, should inflation remain sticky and elevated, this would quickly sap disposable income and thus discretionary spending,” Fitch Solutions added.

Consumer Spending Outlook 2023

Fitch Solutions said consumer confidence stood at -14.6 in fourth quarter of 2022, a further decline from the -12.9 score reported in the third quarter of 2022.

“Still, we note that this is still an improvement from -54.5 reported in (the third quarter of 2022), during the peak of the pandemic,” Fitch Solutions said.

Since then, the US think tank noted that the consumer confidence has improved in line with the economic recovery from the effects of the pandemic.

The Philippines has not released retail sales statistics since December 2021 and Fitch Solution expects retail sales figures to have begun recovery, albeit at a relatively slow pace.