'A full recovery of consumer spending will only take place in 2022'

MANILA, Philippines — Consumer spending in the consumption-reliant Philippine economy is only expected to fully recover next year, with the pace of rebound largely dependent on how fast the government can fully vaccinate Filipinos.

In a report released Thursday, Fitch Solutions, a unit of the Fitch Group, gave a less upbeat forecast: household consumption would begin to recover this year and grow 4% year-on-year to P10.6 trillion, but still below the pre-pandemic level of P11.1 trillion.

It is only in 2022 when consumer spending would likely regain lost ground and grow 5.1% on-year to P11.2 trillion, the Fitch unit said, with “more conventional growth” seen returning in 2023. This outlook assumes that jobs destroyed by the pandemic would be restored, inflation would be manageable, and restrictions would be lifted after achieving herd immunity.

“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalization rates,” Fitch Solutions said.

“Both these factors will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales,” it added.

Fitch Solutions’ outlook means the economy is also only expected to fully recover next year, since household consumption historically accounts for over 70% of the Philippines’ economic output. The Fitch unit forecast gross domestic product to grow 5.8% this year, before expanding at a faster rate of 6.5%.

Until then, consumption is expected to stay tepid, with the possibility of renewed lockdowns to curb the highly contagious Delta variant bringing new threats to the economy. According to Fitch Solutions, households will likely continue reining in spending and beef up their savings to stay afloat amid hard times.

“Economic growth will be underpinned by consumer spending, easing unemployment, and a continued recovery in the country's tourism industry,” it added.