Consumption seen to recover once quarantine restrictions eased

CONSUMER SPENDING in the Philippines is likely to rebound this year when lockdown restrictions are gradually lifted and the coronavirus disease 2019 (COVID-19) vaccine rollout is implemented, Fitch Solutions Country Risk and Industry Research said.

This as President Rodrigo R. Duterte considers a National Economic and Development Authority (NEDA) proposal to further relax quarantine restrictions by March, his spokesperson said on Tuesday.

“This better outlook comes from expectations that there will be more jobs and better incomes, less quarantine restrictions and more businesses reopening,” Fitch Solutions said in a note on Tuesday.

Private consumption, which makes up 70% of the economy, slumped by 7.2% in the fourth quarter of 2020, as consumers remained cautious amid a steady rise in COVID-19 infections.

“If the government is able to effectively inoculate its population over 2021, while at the same time gradually lifting restrictions, we believe consumer confidence will rapidly return to optimism,” Fitch Solutions said.

This year, Fitch Solutions expects household spending to grow by 5.7%, mainly on the low base effect.

“Food and nonalcoholic drink spending was prioritized in household budgets in 2020, and so growth in spending on these items, while remaining positive, will be slightly lower than in 2021,” Fitch Solutions said, noting that it expects the segment to grow by 5.3% after a 9.3% drop in 2020.

On the other hand, growth in other consumer categories such as clothing and footwear spending (8.9%); alcoholic drinks and tobacco spending (10.4%); furnishing and home spending (12.7%); recreation and culture spending (7.3%); and restaurants and hotels spending (10.6%) are seen to grow faster after coming from a low base last year.

Aside from gradual easing of restrictions, consumer spending’s recovery would also be supported by government stimulus measures, including cash support for low-income families, Fitch Solutions said.

Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua on Monday evening urged the President to place the entire country under the most lenient modified general community quarantine (MGCQ) starting March 1 to revive the pandemic-hit economy.

“Given progress on the health side and no spike in COVID-19 cases from the reopening of the economy last October and the year-end holiday, ang recommendation po namin: Number one, we further open the economy to MGCQ for the entire Philippines, especially NCR (National Capital Region) starting March. And the main reason is gusto na po natin ma-mitigate or mabawasan ’yong sickness, hunger, poverty, job and income loss that are arising from non-COVID cases,” he said in a televised Cabinet meeting on Monday night.

If necessary, Mr. Chua said localized lockdowns should instead be implemented at the village level.

Mr. Chua said the Inter-Agency Task Force (IATF) approved in a Feb. 11 meeting the recommendations to shift to modified lockdown, to increase seating capacity in public transportation to 75% from 50%, and to expand the age group allowed to go out.

Presidential Spokesperson Herminio “Harry” L. Roque, Jr. said Mr. Duterte is studying the recommendation, which will be discussed in the next Cabinet meeting on Feb. 22.

“Pero dahil ito ay naging rekomendasyon na ng IATF, napag-usapan na ng cabinet officials na mga miyembro ng  IATF, talagang si Presidente ang nag-aaral kung tama na tayong magpunta sa MGCQ,” Mr. Roque said at a briefing on Tuesday.

Mr. Chua said the strict lockdown had led to income losses of P1.04 trillion in 2020, or an average of P2.8 billion a day, as businesses closed down.

He also pushed for the expansion of interprovincial buses’ operations and the establishment of bike lanes to complement a more active transport support.

Mr. Chua said the government could gradually allow persons between the ages of five and 70 to leave their homes, subject to guidelines by local authorities.

He said the government should balance the support it gives to coronavirus patients and to people who are experiencing hunger especially in the National Capital Region. This is why the economy needs to be reopened further, he added. — Kyle Aristophere T. Atienza and Luz Wendy T. Noble