Filipinos are expected to spend more next year especially on recreation amid government stimulus measures for sectors badly hit by the coronavirus pandemic, and as more people return to work, according to Fitch Ratings.
Household spending will probably grow by 5.7% in 2021 after shrinking by 8% by year-end, the global research firm said in a report on Friday.
Household spending on recreation and culture is expected to grow by 15.3% next year — the fastest among all sectors — after shrinking by 17.8% this year, Fitch analysts said.
Filipino spending on furniture and homes is also expected to increase by 13.7% after contracting by 15.2% this year, while spending on hotels and restaurants will probably grow by 10.5% after shrinking by 16.8% this year, Fitch said.
Spending on alcoholic drinks and tobacco is expected to rise by 10.4% from a contraction of 16.7% by year-end.
Spending on clothing and footwear would probably grow by 8.9% next year after shrinking by 15.6% this year, while food and nonalcoholic drink expenditures could rise by 5.3% next year after growth of 9.3% this year, according to the report.
“Food and nonalcoholic drink spending was prioritized in household budgets in 2020, and so growth in spending on these items, while remaining positive, will be slightly lower in 2021,” Fitch said.
The research firm traced the household spending growth next year to half-a-trillion worth of government fiscal stimulus equivalent to 3.1% of Philippine economic output, including cash aid, tax cuts and wage subsidies to sectors affected by the coronavirus.
The jobless rate could fall to 9% next year from a 16% estimate this year as the economy grows by 6.2% after shrinking by 9.1% this year, Fitch said.
“This is still double the 4.5% unemployment rate we estimate for the pre-COVID-19 environment in 2019, suggesting that household spending will still face elevated pressure from higher than normal rates of unemployment,” it added.
Fitch cited the risk of increased underemployment, with more people returning to work but working fewer hours than before the health crisis, or taking lower-paying jobs that could cut disposable incomes.
“With the recovery forecast for 2021, demand-side pressure will push up prices over 2021 to an average of 3% over the year,” it added.
Household spending growth can be kept as long as the government can curb the spread of the coronavirus and allow greater mobility under relaxed quarantine measures, Fitch said.
Further progress on the development of vaccines that health experts predict to be distributed in the first half of 2021 will fast-track household spending among Filipinos, it added. — Kathryn Kristina T. Jose