Strong consumer spending, which accounted for about a fourth of economic growth prepandemic, is back and driving the Philippines’ recovery, but a relatively lower vaccination rate in the country compared to most of its neighbors remained the top risk to further reopening, UK-based think tank Pantheon Macroeconomics said on Monday.
“The catch-up in household spending in the Philippines appears to be back on track,” Pantheon Macroeconomics senior Asia economist Miguel Chanco said in a report, citing the 1.4-percent month-on-month increase in October’s volume of net sales index reported by the government last week.
Chanco said October was “the first to benefit fully from the government’s move in mid-September to a less-stringent system of granular lockdowns to manage the spread of COVID-19.” Previously, the government had imposed blanket lockdowns covering bigger areas, shedding more jobs and shutting down more economic sectors in the process.
For Chanco, “the scope for catch-up growth remains substantial,” as firms’ October sales were just 92 percent of prepandemic levels.
“Reassuringly, the mobility data have only continued to improve rapidly ever since, with trips to retail and recreation now hovering above the January-to-February 2020 baseline of Google’s dataset, as of the first week of December,” Chanco said.
But Chanco said many Filipino consumers remained risk-averse—for instance, there was a 43-percentage point gap in foot traffic between essential and non-essential trips, which meant that shoppers in the country remained focused on essential items to minimize going out. This risk aversion was the second highest in Asia, after India.
The fourth quarter of 2021 would benefit from rebounding private consumption, but next year may be a different story, Chanco said.
Pantheon Macroeconomics had projected fourth-quarter gross domestic product (GDP) growth to match the third-quarter’s better-than-expected 7.1-percent year-on-year expansion.
Next year, Pantheon Macroeconomics expects full-year GDP growth to slow to 4.5 percent—way below the government’s 7 to 9 percent goal for 2022—from 5.5 percent this year.