Consumer spending to fuel bounceback – Fitch unit

MANILA, Philippines — Robust household spending is seen fuelling a strong rebound from a pandemic-induced recession last year, the research unit of the Fitch Group said.

Fitch Solutions Country Risk and Industry Research said consumer spending is seen bouncing back with a 5.7-percent growth this year after contracting by seven to nine percent last year.

“We hold a positive outlook for the Filipino consumer over 2021. All of our main consumer spending categories will return to positive growth in 2021,” it said.

Fitch Solutions said several categories are seen booking double-digit growth, led by furnishing and home spending at 12.7 percent from a 15.2 percent contraction, restaurants and hotels spending at 10.6 percent after shrinking 16.8 percent, as well as alcoholic and tobacco spending at 10.4 percent after contracting by 16.7 percent.

Furthermore, it said clothing and footwear spending would grow by 8.9 percent, followed by recreation and culture spending with 7.3 percent, as well as food and non-alcoholic drinks spending at 5.3 percent.

“Spending within other consumer categories is estimated to have recorded significant contractions over 2020 as households cut spending on non-essential items, and retail and business operations in these categories were curtailed due to lockdown closures. As such, these categories will grow from a relatively lower base over 2021 and thus will report stronger growth over the year,” Fitch Solutions said.

According to the research unit, the government stimulus measure enacted last year with a commitment of P595.6 billion would support consumer spending this year.

However, Fitch Solutions is closely monitoring whether or not enough of the population are vaccinated over the year in order to ease restrictions and spur a consumer recovery.

“Our forecasts take into account risks that are highly likely to play out in 2021, such as the easing of government support, a reduction in restrictions, and a delay in the vaccine rollout. However, these are risks to outlook that if they do start to play out will lead to forecast revisions,” it added.

Fitch Solutions noted consumer confidence recovered in the fourth quarter last year with an index score of -47.9 compared to -54.5 in the third quarter as the economy partially reopened upon the National Capital Region’s shift to more relaxed general community quarantine in June.

Likewise, it added unemployment rate also improved to 8.7 percent in the fourth quarter from a record high of 17.7 percent in the second quarter when Luzon was placed under enhanced community quarantine to slow the spread of the deadly disease.

“This better outlook comes from expectations that there will be more jobs and better incomes, less quarantine restrictions and more businesses reopening. 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,” it added.

Fitch Solutions sees the Philippines recovering from the recession with a gross domestic product (GDP) growth of 7.6 percent this year after a record 9.5 percent contraction last year.

The global health crisis ended 22 years of GDP growth as the Philippines last experienced a recession in 1998 with a contraction of 0.5 percent due to the impact of the Asian financial crisis. Last year’s slump was the highest on record, exceeding the seven percent decline in 1984.