WITH the Philippines returning to a stricter lockdown, the path to recovery of consumer spending—one of the major economic growth drivers—may be bumpy after quarantine measures ease.
Moody’s Analytics noted in a report on Monday that the country’s gross domestic product (GDP) fell by 9 percent in the first half because most expenditure components declined sharply, including private consumption.
The Philippine Statistics Authority (PSA) reported last week that household consumption plummeted by 15.5 percent already in the second quarter—after only inching up by 0.2 percent three months earlier—as spending in transport, restaurants and hotels, recreation and culture, clothing, alcoholic beverages and education, among others, decreased as well.
“The risks arise from the renewed restrictions on Manila and nearby provinces to contain an increasing trend of new Covid-19 cases, and the significant deterioration in employment conditions, which will hold back the pace of rebound in consumer spending in the post-restrictions phase, given the severe dent to household incomes,” Moody’s Economist Shahana Mukherjee said.
Metro Manila, Cavite, Laguna, Rizal and Bulacan were placed under a modified enhanced community quarantine (MECQ) again from August 4 to 18 following the announcement on August 2. On Monday, there were around 130,000 confirmed cases, over 67,000 recoveries and more than 2,200 deaths.
Mukherjee said that “one of the significant fallouts from the strict and protracted lockdowns is the sharp deterioration in employment prospects,” which led to reduced income and spending.
Latest data shows that the unemployment rate soared to 17.7 percent in April from 5.1 percent during the same period last year. It meant at least 5 million Filipinos were left jobless that month, bringing the total number of unemployed to 7.25 million.
This is expected to get worse, according to Asian Development Bank, projecting the unemployment rate to reach 22 percent in the second quarter in Luzon alone as more job losses are seen due to the pandemic.
RCBC Chief Economist Michael Ricafort, meanwhile, said that consumer spending is likely to plunge again in the third quarter in view of the two-week MECQ in the capital region and nearby areas that could slow down business activities anew.
“Still possible,” he said when asked if the decline would be double-digit again.
“Moving forward, it would be a function of reducing the new number of Covid-19 cases before quarantine measures would be eased further from MECQ after August 18, 2020, and even in the coming weeks/months,” Ricafort added.
ING Bank Manila Economist Nicholas Antonio T. Mapa said he was not optimistic either that household spending will recover any time soon, noting that most of the expenses were allocated for basic goods and health care.
“This means that even if Filipinos are spending on food and health items, gaping holes remain from last year’s transport and leisure expenses, which will not return any time soon,” he explained.
Mapa said those who were “lucky” to still have jobs during the lockdown are likely to channel their income to savings and basic goods or health care, with discretionary spending at the bottom of their lists.