“Revenge spending” is expected to keep the Philippines’ economy growing in the near term, but this boost will soon dissipate as it eats up on savings and high interest rates take a toll on demand.
Nicholas Mapa, senior economist at ING Bank in the Philippines, said in a commentary that consumers were “finally feel(ing)” that normalcy has returned, and that recent trends in household spending were likely to continue through the year-end holiday season.
Thus, Mapa said, fourth-quarter growth in Philippine gross domestic product will still enjoy a push as it did in the third quarter when a higher-than-expected 7.6 percent growth was recorded.
“Being cooped up indoors for more than two years may have fueled a bad case of revenge spending with Filipinos finally getting a chance to do things ‘for the first time in forever,’” he said.
Mapa added that such a mindset unleashed strong spending on non-basic items, with restaurants and hotels, transport, and recreation and culture showing six straight quarters of double-digit gains.
“I had once believed that the bounce from base effects coupled with revenge spending would fade sooner,” he said. “But for the meantime, the Filipino appears willing to simply run the gauntlet to finally enjoy life before COVID-19.”
The economist observed that the growth in consumer spending spread out into home improvement projects, purchases of durable goods, and even car sales—with the latter showing no sign of a corresponding increase in bank auto loans.
“This could be an early sign that some Filipinos have pushed back against higher bank lending rates, only to whittle down savings or resort to in-house financing, which may eventually lead to some problems down the road,” he said.
“Knowing that Filipinos have resorted to borrowing at elevated rates and are dipping into the cookie jar suggests that the glow from revenge spending can only last for so long,” he added. “In this case, for as long as savings can support it and for as long as debt can still be accumulated.”