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Consumer spending likely to inch up as restrictions ease

The government has allowed cinemas to reopen with limited capacity after Metro Manila was placed under Alert Level 3. — PHILIPPINE STAR/ MICHAEL VARCAS

By Jenina P. Ibañez, Reporter

THE POTENTIAL EFFECTS of looser Metro Manila mobility restrictions on consumer spending and this year’s economic growth have drawn mixed levels of optimism from economists and industry heads.

They are turning to the results of eased coronavirus disease 2019 (COVID-19) restrictions from countries with high vaccination rates to call for a faster inoculation rollout and expanded testing.

Cid L. Terosa, a senior economist at University of Asia and the Pacific School of Economics, said the new alert level will boost consumer spending because it removes mobility and transactional constraints brought about by stricter restrictions in the past. The improvement could help bring the economy towards the high end of the government’s lowered 4-5% target for the year.

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“It may not move GDP beyond 5%, but it will definitely make it more possible to achieve at least 5% GDP (gross domestic product),” he said in an e-mail. “The economy needs to grow by at least 6% though to get the economy back on track towards the end of 2022.”

More business activity has been allowed in Metro Manila after it was placed on Alert Level 3 from Oct. 16 to 31.

Ser Percival Peña-Reyes, Ateneo de Manila University Center for Economic Research and Development (ACERD) associate director, said fewer restrictions would have little effect on consumer activity if public anxiety persists amid a slow vaccination rollout.

“I don’t think (the new alert level) will make that much of a difference if people are still scared to move around, because clearly not enough is being done to improve confidence, given that we are behind on vaccination,” he said in a phone interview.

The Philippines last Friday began vaccinating young people aged 12-17 against COVID-19. As of Oct. 14, the Philippines has vaccinated 21.6% of its population, according to Our World in Data website.

ACERD is retaining its 3-4% GDP growth forecast for 2021, although Mr. Peña-Reyes admits the projection could be optimistic.

Philippine economic growth projections have been slashed amid a Delta-variant outbreak that further dampened consumer and business confidence.

The International Monetary Fund (IMF) lowered its 2021 Philippine GDP forecast to 3.2%, from the 5.4% projection set in June. Fitch Ratings downgraded its projection to 4.4% from 5%, while the ASEAN+3 Macroeconomic Research Office (AMRO) cut its forecast to 4.3% from 6.4%.

Going into the fourth quarter, business leaders are confident that the new alert level in the capital region will boost consumer confidence and consumption, especially in the lead up to the holidays.

To achieve this, a retailers group head suggested that some cities be downgraded to Alert Level 2, adding that more transportation availability will improve consumer traffic.

“There should no longer be any getting back to stricter lockdowns and (they should be) allowing senior citizens and children to malls following strict COVID-19 protocols,” Philippine Retailers Association (PRA) Vice-Chairman Roberto S. Claudio, Sr. said in an e-mail.

“Sales will improve for restaurants, fastfood (chains) and retailers and this will further improve towards the fourth quarter holiday season.”

Philexport Chairman George T. Barcelon in a phone interview said pent-up demand and 13th month pay will help drive consumption during the holidays.

Some countries with higher vaccination rates have been planning for a COVID-19 response strategy that treats the virus as endemic instead of pursuing “Zero COVID.” This is the case for Singapore, although a recent spike in cases led the country to reintroduce restrictions.

The Philippines should adopt the expanded testing, treatment, and vaccination strategy of economies that are able to open up, Ateneo’s Mr. Peña-Reyes said.

Noting a resurgence in infection rates in countries with high vaccination rates, Mr. Barcelon said the Philippines should prepare quarantine centers and offer free COVID-19 testing.

“The vaccinated can infect others and be infected. We would like to have the economy open, definitely, but at the same time, we should err on the side of caution,” he said in English and Filipino.

“When there is testing from the grassroots, mobility applies to all sectors of our society: schooling, economy, and social. Testing is very crucial to open schooling.”