PHL consumer spending to pick up in 2022 – Fitch Solutions

The improving employment rate and consumer sentiment in the Philippines could back a projected 5.1% household spending growth next year, Fitch Solutions Country Risk and Industry Research said. 

In a report released on Friday, Fitch Solutions said consumer spending could grow by a total of P11.1 trillion in 2022, accelerating from the estimated 3.5% growth this year. 

It noted third quarter consumer confidence index rose to -19.3 in the third quarter of 2021 from -30.9 in the preceding three months. The unemployment rate improved to 6.9% in July from 8.7% in April. 

Both indicators suggest “an improving economic and employment environment, which will bolster consumer confidence and spending,” Fitch Solutions said. 

Household consumption, which typically accounts for 70% of the country’s economy, declined by 8.3% in 2020. 

In the second quarter, household spending grew 7.2% year on year as lockdowns eased.  

“Over 2022, consumer spending growth will begin to moderate, as the Filipino consumer continues its recovery from the contraction in 2020,” Fitch Solutions said. 

The forecast for consumer spending is based on the Fitch Solutions’ unemployment rate estimate that it would average 8% over 2022, an improvement from 11% seen this year. 

“While this is still higher than the pre-pandemic environment (the unemployment rate averaged 5.1% over 2019), it indicates an improving economic and employment environment, which will bolster consumer confidence and spending,” the report said. 

“This better outlook stems from expectations that there will be more jobs, higher income, looser restrictions, and more businesses reopening.” 

Latest jobs data showed that unemployment went up to 8.1% after stricter lockdowns were reintroduced in August. 

Meanwhile, Fitch Solutions said it does not expect consumer outlook to be derailed by potentially higher inflation next year. 

It estimates 6.8% year on year real gross domestic product (GDP) growth in 2022 following its lowered 4.2% growth estimate for 2021. 

“Our Country Risk team expects household savings rates to remain elevated given the pandemic uncertainty and loss of income over past quarters, while the domestic employment situation is unlikely to improve markedly in the near term. As a result, the Philippines’ economy is expected to fully recover only in 2022, with more conventional growth patterns returning in 2023.” 

Consumer spending recovery hinges on the country’s vaccination drive, which still lags in Asia, Fitch Solutions said. It expects mobility restrictions to ease as more Filipinos receive the jab. 

Less than 25% of the Philippine population has been fully vaccinated against COVID-18, the Johns Hopkins University tracker showed. — Jenina P. Ibañez