PHL consumer spending rebound not seen till ’22

ITCH Solutions, the research arm of the Fitch Group, said consumer spending—one of the main drivers of the local economy—is not bound to fully recover until 2022, as the Philippines continue to lag in vaccination rates.

In a report published on Thursday, Fitch Solutions projected total household spending to reach P10.6 trillion in 2021, still lower than the total spending of P11.1 trillion before the pandemic in 2019.

“We forecast real household spending in the Philippines to post growth of 4 percent year-on-year in 2021, the start of a recovery from the 8.3 percent year-on-year contraction in household spending estimated over 2020, caused by the Covid-19 pandemic and related lockdown measures,” Fitch Solutions said.

“As a result, we believe that a full recovery of Philippines’s consumer and retail sector will only take place in 2022, with more conventional growth returning in 2023. We forecast real household spending to expand at 5.1 percent in 2022, with total spending reaching P11.2 trillion,” the think tank added.

Fitch Solutions said the country’s recovering unemployment numbers and the expected downtrend in inflation will likely support their view of consumer spending recovery in 2022.

The delay in recovery, the research firm said, largely rests on the country’s lagging vaccination numbers.

“The Philippines’s vaccination drive is lagging behind the wider Asia region, with 9.9 percent of the population having received at least one dose on July 23. As such, we believe that most Covid-19 related restrictions will only be removed in the late 2021, allowing for continued consumer spending growth in 2022,” Fitch Solutions said.

“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalization rates. Both these factors will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales,” it added.