Gross nat'l savings fall amid drop in disposable income

THE COUNTRY’S gross savings fell by more than a quarter last year despite a drop in household spending, as Filipinos had less disposable income, data from the Philippine Statistics Authority (PSA) showed.

Gross national savings, or the difference between gross national disposable income and the combined household and government final consumption, totaled P4.43 trillion at current prices in 2020, declining by 27.9% from P6.15 trillion in 2019.

This figure is equivalent to 23% of gross national income (GNI) in 2020, lower than 29% of GNI the year before.

The country’s economic output slumped last year, with gross domestic product (GDP) and GNI posting declines of 9.6% and 11.4% in real terms, respectively. The latter refers to the sum of the nation’s GDP and net primary income from the rest of the world.

At current prices, GDP and GNI respectively slid by 8.1% and 10% last year. During the period, household spending fell by 5.7% to P13.48 trillion in 2020, while government spending grew 12.6% to P2.74 trillion.

The gross national disposable income sat at P20.65 trillion in 2020, a 9.7% drop from the P22.88 trillion in 2019. This was obtained by subtracting the GNI from the net difference between “current transfers” to and from the rest of the world.

Accounting for population, net disposable income per capita was estimated at P189,884 in 2020, down from P204,058 in 2018 and P213,216 in 2019.

By institution, nonfinancial corporations accounted for the highest gross saving with P3.80 trillion, followed by that from financial corporations with P1.43 trillion and “households including nonprofit institutions serving households” with P210 billion. On the other hand, the general government posted negative savings with P1.01 trillion during the same period.

“This huge decline in the country’s total savings shows that consumers, businesses and other institutions used up precious savings to cope with the impact of the pandemic. It’s a hefty decline and the impact on disposable income levels were huge as well,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the strict lockdowns forced work stoppages across the country.

“As a result, incomes were lost or whittled down with overall compensation to employees falling by 6.9% for the year while household spending fell by 5.7%. Investment outlays or gross capital formation was also hard hit by the recession, plunging by almost 40% in 2020 as households and firms alike held back on making expansion plans as they conserved cash and tightened their belts,” Mr. Mapa said in a separate e-mail.

“Subdued economic activity has definitely forced Filipinos to tighten their belts while also dipping deeper into their savings just to make ends meet,” he added.

In another e-mail interview, University of Asia and the Pacific (UA&P) School of Economics Senior Economist Cid L. Terosa noted the negative contribution of government in savings, which he said, can be traced to the “extraordinary pandemic-related spending that it had to incur.”

The government’s share to gross savings was -22.7% last year, a sharp reversal from its 8.7% share in 2019.

“To prevent further contraction in the share of government in savings, the government needs to ramp up revenuegenerating activities that are ultimately linked to the further opening of the economy,” Mr. Terosa said, adding that gross savings this year will “continue to be held down by sluggish business and economic activities.”

For UnionBank’s Mr. Asuncion: “[F]urther contraction can be prevented with more appropriate and targeted fiscal stimulus, which is also being carried out by our neighbors as they further grapple with the impact of the pandemic,” he said.

Mr. Asuncion said the recovery in gross savings “may take some time.”

“Like our forecast of GDP level returning to pre-pandemic figures by end of 2022, gross savings may subsequently return at the same period. Downside risk to this view is the potential spread of new variants that brings more uncertainty on the table,” he said.

Similarly, ING Bank’s Mr. Mapa said the substantial hit on savings coupled with the “still tenuous” recovery in the Philippine labor market suggests economic recovery “will be a protracted and bumpy one.”

“The rip-roaring pace of household consumption will not likely return soon as households and firms rebuild their depleted savings and cut back on spending amidst the recovery,” Mr. Mapa said.

“Gross national savings will only likely revert to pre-pandemic levels at least a year after we have returned to pre-COVID levels of growth, suggesting that savings will be thin all the way through to 2022. Firms will also likely be holding on to cash in the near term even as the economic recovery takes hold as they await the full recovery of the once vaunted Filipino consumer,” he added.

The latest figures were based on the PSA’s annual Consolidated Accounts and Income and Outlay Accounts. These accounts present a summary of transactions and relationships among the various flows of the economy at current prices, which include production, consumption, income, gross accumulation, and economic transactions with the rest of the world. —