PRIVATE CONSUMPTION in the Philippines may continue to be dampened due to elevated debt and weak savings, Pantheon Macroeconomics said.
“Domestic demand in the Philippines ended 2023 softly, despite what appeared to be the start of a promising recovery in the third quarter,” it said in its Weekly Emerging Asia Monitor.
“The savings rebuild from the COVID hit made little to no headway in 2023, and this will continue to pose a huge headwind against consumption. The same can be said about the constraints on future household spending imposed naturally after a big and prolonged debt binge, fueled by the reopening and global cost-of-living crisis,” it added.
The Philippine Statistics Authority reported that household consumption grew by 5% in the third quarter, the weakest reading in two years. Consumption typically accounts for three-fourths of the economy.
“On our seasonal adjustment, the volume of net sales fell by a further 1.7% month to month in November… extending what we thought was a temporary 1.3% blip in October,” the think tank said.
“To be sure, the fourth quarter still appears salvageable. Assuming the bleeding stopped in December and sales just flattened out, the quarterly average would essentially be stagnant, following the third quarter’s punchy 3.1% quarterly jump,” it added.
Pantheon Macroeconomics said it expects the weakness in sales to continue in December, in line with the results of the central bank’s consumer expectations survey for the fourth quarter.
The survey indicated that the consumer outlook was pessimistic in the fourth quarter due to rising prices and low salaries. The BSP confidence index for consumers declined 19% in the fourth quarter, against a 9.6% contraction in the third quarter.
Consumers were also reluctant to buy big-ticket items in the fourth quarter.
“Indeed, the post- pandemic recovery in sentiment is no longer running far ahead of spending plans, with the seasonally adjusted confidence index plunging to -33.9 in the fourth quarter, the weakest print in nearly three years,” Pantheon Macroeconomics said.
It also noted that household incomes suffered a “massive hit” in the fourth quarter as savings declined.
The percentage of households with savings dropped to a seasonally adjusted 30.1%, from 34.0% in the third quarter, while the share of households that could afford to set aside any savings declined to a three-year low of 28.6%, from 33.9% in Q3.
Credit-card debt growth is proving resilient, if unsustainable in the long run at twice the historical pace currently; the surge in salary-based general consumption — or ‘payday’ — loans, however, continues to unwind rapidly, it added. — Luisa Maria Jacinta C. Jocson
