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Consumers borrowed less, saved more in 2020

/ 05:24 AM February 19, 2021

Well-off Filipino consumers have refrained from borrowing amid the pandemic-induced recession and instead saved more of their money given the uncertainties wrought by COVID-19.

The Washington-based Institute of International Finance’s (IIF) Global Debt Monitor report released on Wednesday showed that while the share to the economy of government, financial sector, and nonfinancial corporates’ debt rose in 2020, those of households slightly declined.

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The IIF’s estimates showed government debt as a percentage of gross domestic product (GDP) climbed to 48.4 percent as of end-2020 from 37 percent in 2019.

The financial sector’s debt-to-GDP ratio also inched up to 11.8 percent in 2020 from 11.5 percent in the previous year, while nonfinancial corporation’s obligations rose to 32.6 percent of GDP from 30.8 percent in 2019.

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In contrast, the share of household debt to GDP last year eased to 16 percent from 16.4 percent in 2019, IIF data showed.

“Based on bank lending data, consumer loans have been showing a deceleration in growth, indicating likely weaker demand for borrowing. Loans to consumers are also what is likely driving up the latest NPL (nonperforming loan) ratios, suggesting the struggles faced by Filipinos on the ground,” ING senior economist for the Philippines Nicholas Mapa said.

“During these trying times, households are likely channeling tighter budgets to basic goods and necessities, a trend noted in both national income accounts and inflation data—spending more on food and less on leisure,” Mapa said.

“With the challenging environment, households and firms alike are probably moving to conserve cash, with plans for expansion activities likely on hold,” Mapa added.

Citing the results of the Bangko Sentral ng Pilipinas’ consumer expectations survey during the fourth quarter of 2020, Security Bank Corp. chief economist Robert Dan Roces said the percentage of savers “increased in the middle- to high- income groups, offsetting the decline in the low-income group.”

“Savers did so for emergency use and health or hospitalization purposes, among the top reasons,” Roces said. —BEN O. DE VERA

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TAGS: COVID-19, gross domestic product (GDP)
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