Fitch Solutions, a unit of Fitch Group, revised downward its total household spending growth forecast for the Philippines this year to 6.7 percent from its previous estimate of 7 percent, taking into account the huge impact of the pandemic to the consumer and retail sector.
Fitch said in a report Wednesday its projection was also significantly slower than the actual 9.8-percent year-on-year expansion in 2019.
“Philippines’ consumer and retail sector is expected to be one of the sectors hardest hit by the month-long lockdown of Luzon island, where 50 percent of its population resides and which accounts for 73 percent of the country’s GDP,” Fitch Solutions said.
“With consumers essentially confined to their homes, we have revised down our total household spending for 2020 to expand by just 6.7 percent y-o-y, down on our pre-coronavirus projection for 2020 of 7 percent growth y-o-y and below the 9.8 percent y-o- y growth recorded in 2019,” it said.
“During this period of lockdown, we expect consumers from a demand perspective to focus their spending on priority purchases [food and health-related products]. From a supply perspective, we note that major shopping malls in the country [such as SM Supermalls, Star Malls, Araneta City Malls] are either completely closed, or only units associated with grocery, pharmacy or takeout food services open,” it said.
Fitch Solutions said like many countries under lockdown, food and drinks and health spending were expected to increase, while all other consumer spending categories were expected to decrease.
Citing its recent analysis of retail data released from China during their lockdown in January and February 2020 and preliminary data from South Korea under its social distancing measures in February 2020, Fitch Solutions validated its previous predictions that consumers under lockdown would prioritize essential (food and drink, health) spending over all other categories (such as household appliances, home spending).
“We expect this to hold even for non-essential e-commerce shopping online [e.g. for clothing and footwear], due partly to the aforementioned ‘prioritizing’ mindset amongst consumers, and partly due to delivery companies prioritizing the delivery of the increased essential food and grocery orders over those of non-essential goods,” Fitch said.
It said it was currently finalizing its 2020 consumer spending sub-segment revisions for the Philippines and would release more in-depth forecasts in the third-quarter consumer and retail report.
Fitch Solutions also said the current stimulus package of the government, worth only P27.1 billion ($500 million), was unlikely to have a considerable impact on the Philippines’ economy or consumer spending.
It said that despite this fiscal package, Fitch revised downward the real GDP growth forecast this year to 4 percent from a pre-coronavirus projection of 6.3 percent.
It said Malaysia, with less than a third of Philippine’s population, announced a stimulus package worth $57 billion on March 27.