‘Household spending to bounce back in 2021’

Consumer spending in the Philippines is seen to recover in 2021 after posting subdued growth this year, according to a Fitch Group unit.

In a report on Friday, Fitch Solutions said it expected household spending to start rebounding next year by rising by 5.7 percent year-on-year, a big improvement from the 8-percent contraction it forecast this year.

It also projected the country’s main consumer spending categories to resume growing in 2021.

“Food and non-alcoholic-drink spending were prioritized in household budgets in 2020, so growth in spending on these items, while remaining positive, will be slightly lower in 2021,” the Fitch unit said.

It also forecast spending on food and non-alcoholic beverages to pick up by 5.3 percent in 2021.

“Our forecast for household spending over 2021 takes into account the economic impact of the Covid-19 pandemic on Filipino consumer spending and the government’s stimulus measures to support the economy,” Fitch Solutions explained.

These measures include Republic Act (RA) 11469, or the “Bayanihan to Heal as One Act,” which President Rodrigo Duterte signed on March 24 and expired on June 24; and RA 11494, or the Bayanihan to Recover as One Act,” which was signed on September 11.

Fitch Solutions has stressed the importance of the stimulus measures enacted this year, which have so far hit P595.6 billion or 3.1 percent of the country’s gross domestic product.

These fiscal packages, it said, aimed to support vulnerable individuals and groups, which includes cash programs for low-income households, tax deductions and wage subsidies.

Besides state support, the Fitch unit also said the dynamics behind its outlook were in line with its country risk team’s expectation that the Philippine economy would grow by 6.2 percent in 2021 from its projected 9.1-percent contraction this year.

This is seen to ease the unemployment rate in the country next year, which Fitch Solutions expects to hit 9 percent from its forecast of 16 percent for 2020.

Although the improved jobless rate is likely to support household incomes over the next year, it said consumer spending “will still face elevated pressure from higher than normal rates of unemployment.”

“We also note that there is a risk of increased underemployment. People returning to work, but working fewer hours than pre-Covid-19 (coronavirus disease 2019) [numbers], or taking lower paying jobs will put downside pressure on disposable incomes,” the Fitch unit said.

According to Fitch Solutions, its household spending projection takes into account risks that are highly likely to play out in the short term, such as the easing of government support.

Inflation also remains a risk for consumer spending over the next year, it said, adding that “with the recovery forecast for 2021, demand-side pressure will push up prices over 2021 to an average of 3.0 percent over the year.”