FILE PHOTO: A small bottle labeled with a “Vaccine” sticker is held near a medical syringe in front of displayed “Coronavirus COVID-19” words in this illustration taken April 10, 2020. REUTERS/Dado Ruvic/Illustration
MANILA, Philippines — Amid high unemployment and smaller savings due to the harder times wrought by the COVID-19 pandemic, consumption among Filipino households has been projected by UK-based think tank Oxford Economics to grow among the slowest in Asia this year.
Across Asia-Pacific, most economies saw household savings rise last year, but for Oxford Economics, “the bulk of excess savings accrued in 2020 won’t be spent quickly.”
“Our baseline forecast assumes households will treat these funds as wealth rather than income. Most of the savings have also been accrued by high-income earners, who tend to have a lower marginal propensity to spend,” Oxford Economics head of Asia economics Louis Kuijs and senior economist Lloyd Chan said in a May 25 report titled “Asia-Pacific: How households unleash their savings is key to growth.”
“In 2021 we expect savings rates will decline, driven by pent-up demand, which will be supported by pickups in employment, income, and vaccinations. Nonetheless, the pace of rising consumption will vary across economies, depending on income growth, savings behavior, and the health situation,” they said.
In the case of the Philippines, Oxford Economics’ projections showed private consumption was expected to grow by less than 3 percent in 2021, only exceeding the over 1-percent growth forecast for Japan.
As of the first quarter of 2021, the Philippines had the highest unemployment rate among 12 Asia-Pacific economies covered by Oxford Economics’ report. The Philippines’ jobless rate of 7.1 percent in March was nonetheless the lowest since the pandemic began, but joblessness likely picked up again in April when the National Capital Region (NCR) Plus, accounting for half of the economy, reverted to two weeks of the most stringent enhanced community quarantine (ECQ).
But in terms of lockdown stringency, the Philippines was placed by Oxford Economics at the bottom of the pack as the recent surge in COVID-19 cases in Taiwan, Vietnam, India, Hong Kong, Malaysia, Indonesia, Thailand, Japan, and Singapore prompted authorities in these countries to impose stricter quarantines compared to restrictions last year.
Amid the longest COVID-19 quarantine in the region, nominal disposable incomes in the Philippines in 2020 fell by about 8 percent — the biggest in Asia-Pacific, Oxford Economics and Haver Analytics’ estimates showed.
As the domestic economy was expected to start recovering from the pandemic-induced recession, nominal disposable incomes in the Philippines were expected by Oxford Economics to rise by over 5 percent in 2021.
However, the about 5-percent household savings rate projected for the Philippines in 2021 would not only be the lowest in the region but also fall below the averages in 2018 to 2019 pre-pandemic and during the height of the COVID-19 crisis in 2020.
“In Thailand, Indonesia, and the Philippines, households appear to have drawn on their savings, leading to a decline in their savings rates” last year, Oxford Economics said.
The latest government data showed that household consumption — which accounted for about three-fourths of the pre-pandemic economy — contracted by 4.8 percent year-on-year during the first quarter, although a slower drop compared to previous quarters as restrictions on the movement of people and goods as well as economic activities gradually eased.