HOUSEHOLD spending is expected to climb back to growth territory in 2021 on the back of improvements in the local labor market and easing in the imposed restrictions to curb the spread of Covid-19, an international think tank said.
In an economic bulletin released on Tuesday, Fitch Solutions announced a forecast growth of 5.7 percent in the country’s consumer spending in 2021, after a 7.9-percent decline in 2020.
“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,” Fitch Solutions said.
The research arm of Fitch Group said the expected improvement in the country’s consumer spending—one of the pillars of the Philippine growth story—will come from improved employment, which will result in better incomes in the Filipino family.
“The unemployment rate in the Philippines is trending downwards, from a high of 17.7 percent in the second quarter of 2020, to the current 8.7 percent over the fourth quarter of 2020. While this is still higher than a pre-Covid-19 environment [the unemployment rate averaged 5.1 percent over 2019], it does indicate that consumers will begin to see their disposable incomes improve,” Fitch Solutions said.
“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 further noted that improvements will be seen across the board, across all sectors in consumer spending.
Furnishing and home spending is projected to grow the fastest for the year, according to Fitch Solutions’ forecast at 12.7 percent. This will be followed by restaurant and hotel spending at 10.6 percent.
Alcoholic drinks and tobacco spending is expected to grow by 10.4 percent, clothing and footwear spending by 8.9 percent and recreation and culture spending by 7.3 percent.
Food and non-alcoholic drinks spending, which was the only sector that did not contract in 2020, is expected to grow by 5.3 percent in 2021. Fitch Solutions, however, warned that while some risks are already incorporated in their forecasts, vaccine delays will likely change the positive outlook for consumer spending.
“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 roll out,” Fitch Solutions said.
“However, these are risks to the outlook that if they do start to play out will lead to forecast revisions,” it added. These include delays in the vaccine rollout, renewed restrictions and civil unrest.
“As of writing, the Philippines has not begun vaccinations yet. As such, we will continue to follow its progress and whether or not enough of the population are vaccinated over the year, in order to ease restrictions and spur a consumer recovery,” Fitch Solutions said.