Amid the financial stress induced by the coronavirus pandemic, Fitch Solutions has downgraded its household spending outlook for the Philippines to 3.4 percent this year—from 5.8 percent earlier—as consumers would likely to focus only on essentials like food and health-related expenses.
The Fitch unit, in its country risk and industry research on Tuesday, noted that this was markedly lower compared to 5.4-percent expansion in household spending last year.
Along with this revision, the debt watcher also projected lower economic growth of 4 percent from pre-pandemic forecast of 6.3 percent for 2020.
The enhanced community quarantine—which was extended until May 15 in some areas—has changed the consumer behavior and purchasing patterns of the public, Fitch Solutions noted.
“For consumers in countries where a lockdown has been initiated, and for consumers who believe that their governments might implement this measure, the spending focus is narrowing further, with a concentration on priority purchases,” it explained, citing food, nonalcoholic drink and health-related expenses.
With this, the outlook for food and nonalcoholic drinks spending was increased to 9.35 percent from 6.15 percent. The Fitch unit said that while panic buying has eased, consumers would still likely to prioritize the said products.
Health spending is likely to expand by 10.24 percent due to pandemic, higher than 7.62 percent before, this year. “We expect more over-the-counter medication sales, with consumers seeking medicine and health-related purchases during the pandemic,” Fitch Solutions said.
Spending for alcoholic drinks and tobacco will only grow by 4.56 percent—lower than 5.76 percent previously—amid temporary closure of bars and pubs because they are deemed nonessential services. The government has also imposed liquor ban during the lockdown as a health and safety measure.
For clothing and footwear, which is another nonessential business, spending outlook was brought down to 4.36 percent from 5.37 percent. E-commerce may not drive the sector’s sales either, Fitch Solutions noted, explaining that deliveries are prioritized for food still.
Outlook for housing and utilities spending slid to 6.16 percent from 7.35 percent. “Given that the Philippine government has announced land rental waivers as part of the stimulus program, we expect that at least some of these rental rebates will be passed on to consumers and result in them paying less rent,” the Fitch unit said.
Furnishing and home spending forecast declined to 5.08 percent from 5.74 percent given that it is also nonessential.
Following the suspension of public transport in major cities, transport spending outlook was revised down to 5.97 percent from 6.8 percent for this year.
Filipino consumers are likely to cut down on smartphone, or electronics purchases this year, bringing the communication spending outlook to 6.28 percent from 7.03 percent.
Spending outlook for recreation and culture was changed to -0.91 percent from -0.30 percent because of unlikely possibility of any travel in the short term. Fitch Solutions, however, noted that demand for streaming services like Netflix was increasing.
Along with this, the research arm of the Fitch group shed outlook for restaurant and hotel spending to 4.83 percent from 6.80 percent. In the Philippines, while some restaurants were closed, many are still offering delivery services. Some of the hotels, meanwhile, are allocated as quarters for health workers.
Education expenses will likely expand by 5.78 percent this year, lower from previous forecast of 6.95 percent, as government encourages delay in tuition fee payment amid the pandemic. “While they have not asked for tuition fee waivers on behalf of the students, if this is encouraged, we will expect that school fees and education spending will fall,” it added.
Meanwhile, personal, insurance and other spending outlook was cut to 5.22 percent from 6.15 percent.
According to a survey conducted by the Bangko Sentral ng Pilipinas, the country’s spending outlook index of household on basic goods and services slumped to 33.3 percent for the second quarter from 37.1 percent a quarter ago.
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