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Philippines: Consumption to remain muted this year
MANILA, Philippines — Private consumption is expected to stay muted this year as the labor market remains challenging and as households continue to rebuild savings lost since the pandemic started.
In its latest economic monitor, Pantheon Macroeconomics said consumption, which accounts for over 70 percent of the economy, is still fragile due to non-virus headwinds.
Pantheon senior Asia economist Miguel Chanco emphasized that the weak labor market continues to weigh on spending behavior in the country.
The number of unemployed Filipinos has dropped to its lowest level since the pandemic started, but the labor market has yet to fully improve, as indicated in the lack of quality jobs available.
Latest data showed the unemployment rate slid to 6.5 percent in November, but underemployment inched up to 16.7 percent.
“This is still some two percentage points above the pre-COVID level and, more disconcertingly, demand for labor has yet to show any real signs of recovering,” Chanco said.
“Job openings have been stuck at around 235,000 since the third quarter of 2020, less than half of the average in 2019,” he said.
Apart from existing labor woes, Chanco noted that the rebuilding of the massive savings lost since the pandemic hit in 2020 is clouding prospects for consumption recovery.
Households with savings rose to 30.2 percent in the fourth quarter of 2021 from 25.2 percent in the third quarter, but this is still below the pre-COVID level of up to 38 percent.
“Another setback cannot be ruled out in the current quarter, either if Omicron forces households to dip back into their savings in the same way that Delta did in the third quarter,” Chanco said.
Spending intentions of consumers also remain depressed, even when the economy was more open during the latter part of last year.
The latest consumer survey from the central bank revealed that only five percent of households intend to spend on big-ticket items, such as durable goods and cars in the next 12 months.
While this is a slight improvement from the past quarters, this remains far from the pre-pandemic peak of 11 percent.
Chanco maintained that a healthy recovery in private consumption will be critical for the Philippines this year as the May elections are expected to apply temporary brakes on government spending and investment.
For now, Pantheon is sticking to its 4.5 percent gross domestic product forecast for the Philippines this year, but Chanco said the surge due to Omicron is implying that risks are to the downside.
“It looks inevitable that the Omicron wave eventually will grow to be much larger than the Delta outbreak. The question for the economy going forward is whether or not it can stomach another surge,” Chanco said.
Source: https://www.philstar.com/business/2022/01/11/2153032/consumption-remain-muted-year