WE are celebrating an unusual Valentine’s Day, commonly a day where people—lovers and those without—are in a frenzy of activities from shopping, movies, concerts, staycations, travels and vacations. In fact, it is one of the consumer-driven activity of the year, possibly second to Christmas. All these are bound to change significantly this year because of the COVID-19. Romantic dinners and concerts that are usually fully booked, are now at risk or are already being canceled. We are virtually postponing Valentine’s Day. This is not all, the UAAP and various festivals around the country have already been canceled as a preventive measure.
Indeed, the Department of Tourism is correct to say that the biggest sector to be affected by the virus are tourism activities. While international tourism will take a hit, domestic tourism is at risk as well. Tourism is one of the highest local value-added activity for businesses with the following percentages of the activity: accommodations (26 percent), food (24 percent), transport (23 percent), entertainment (14 percent) and shopping (11 percent). Certainly, many of these are part of daily and weekly life in the country, especially food, transport and shopping.
How do these relate to our daily and weekly budget then? Considering the latest mix of the consumer basket, our precautionary behavior will most likely decrease the current expenditure shares of the following: eating out (12 percent), shopping and recreation (9 percent) and transport (8 percent). Food as a share will most likely remain, but people will be eating outside less. Shopping and retail will most likely be slower as we are already seeing less people congregating in malls. This means that strolling or unnecessary exposure outside will be avoided. This will make people conscious of their use of shopping time to buying essential items and lessen leisure related expenditures. Hence, while “malling” is a way of life in many urban centers, this temporarily will be slowing down. As people lessen their recreational activity, transport will similarly experience less movement of people. The other side of this, of course, is the shifting of the expenditure shares of other items particularly health care. Health care is about 4 percent of the average consumer expenditure. With this increased consciousness to protect ourselves, this could increase visits to medical facilities and expenditures on personal care, vitamins and stamina-building products. The continuous reminders of regular washing of hands could significantly increase water consumption—especially challenging in Metro Manila as water pressure remains below standard. As more people stay at home, demand for on-demand movies and entertainment are expected to increase, pulling with it communication expenses. Currently, communication expense comprises about 3 percent of total expenditures. It could also create an increase in demand for food and many app-based products to be delivered, helping to pull up with it the demand for logistics and online shopping (assuming that the products can be delivered out of China, where the base of many products are). It should be noted also that online shopping demand might shift to products that are more for home entertainment and home needs, rather than general consumer items. A big help to consumers, meanwhile, is the decreasing demand for oil products in China. China’s demand for oil has dropped about 20 percent from last month, pulling with it world oil prices. This is benefiting oil importers like the Philippines. It should help lower costs of logistics and transport. With less economic activity, however, the direct effect to household’s budget will not be high.
In summary, the immediate short-term effect of the COVID-19 will most likely be less shopping, less travel, less outside recreation, less movement to retail centers, less eating out, less gigs affecting about 25 percent of total household expenditures. The less expenditures in these items are expected to shift to more health, more water consumption, more home entertainment, more communication and possibly more online shopping and food delivery. This is a short-term positive for changing behavioral patterns of consumption. Savings can be a short-term benefit. With only less than 15 percent of the population having bank accounts, this can be an opportunity for people to consider the extra cash that can be generated out of this situation to be part of savings. Also, it can be an opportunity to raise insurance consciousness. Even with universal health care, people should be aware of the different risks that we are facing from health, life and other assets. Both savings and insurance should become part of our expenditure basket so that we also take into consideration the risks we are all taking. It cannot always be government who is taking the risks for everybody. Finally, I hope that this health challenge that is upon us will lead to more family time at home and increase conversation to find ways to benefit out of this situation.