FITCH SOLUTIONS Macro Research said it reduced its 2020 consumer spending growth estimate for the Philippines to 6.7% from 7% due to the lockdown imposed on Luzon to contain the coronavirus disease 2019 (COVID-19) outbreak.
Fitch Solutions said spending will be focused on food and health-related products, depressing purchase activity for items deemed less essential like clothing, footwear and appliances.
In a note issued Tuesday, Fitch Solutions said the new estimate is also lower than the 9.8% rise in consumer spending in 2019.
It said the assessment was based on spending patterns observed during the China lockdown in January and February and the social distancing measures in South Korea.
“We expect this to hold even for non-essential e-commerce shopping online (e.g. for clothing and footwear), due partly to the aforementioned ‘prioritizing’ mindset among consumers, and partly due to delivery companies prioritizing the delivery of the increased essential food and grocery orders over those of non-essential goods,” Fitch Solutions said.
The month-long enhanced community quarantine (ECQ) was initially implemented in Metro Manila on March 15 and was then expanded to Luzon. It will run until April 12 if the outbreak is controlled by that time. Fitch Solutions said the lockdown “could be extended, given initial difficulties implementing the measures and confusion over what restrictions were in place.”
Fitch Solutions is of the view that the first fiscal stimulus package worth P27.1 billion may not have a “considerable” impact on the economy or consumer spending.
The P27.1 billion stimulus program announced by economic managers early in the lockdown was focused on supporting the tourism sector. The program also includes a package for the health sector and some subsidies for affected workers and establishments.
“For scale, Malaysia, with less than one third of Philippine’s population, announced a stimulus package worth $57 billion (about P2.9 trillion) on March 27.”
Fitch Solutions said that the P200 billion package for vulnerable Filipinos recently announced by President Rodrigo R. Duterte may help to boost consumer spending outlook in the second half of 2020 and in 2021.
Mr. Duterte said Monday that the government has allotted P200 billion to aid low-income households to support those who may have been thrown out of work during the lockdown.
Cash assistance for the vulnerable population will range from P5,000 to P8,000.
Fitch Solutions downgraded its 2020 growth outlook for the Philippines to 4% in late March from an earlier forecast of 6% mainly due to the outbreak’s impact on tourism, remittances, the supply chain, and foreign direct investment. If realized, this projection will be lower than the 5.9% recorded in 2019 and the official target of 6.5% to 7.5% set by the government. — Luz Wendy T. Noble