Strong consumer spending, which accounted for about a fourth of economic growth pre-pandemic, 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 (Dec. 13).
“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 pre-pandemic 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.
However, 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, even as more and more consumers were also going out for non-essential trips in Indonesia and Thailand, he said.
The fourth quarter of 2021 would benefit from rebounding private consumption, but 2022 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.
Chanco said catch-up growth “can’t be said about the first quarter of 2021, and possibly beyond, as the progress on COVID-19 management seems fragile, if not largely artificial.” He pointed to declining testing plus a mass inoculation program that was lagging behind in the region.
“On the surface, the Philippines’ vaccination drive appears to be in the middle of the pack, with roughly 36 percent of the population double-jabbed around nine months into the campaign. But only 49 percent have had at least one shot, which puts the country second from the bottom” just above Indonesia, Chanco said.
“At best, the comparatively low share of the population with partial protection from a single shot could merely reflect an official policy priority to get as many vulnerable groups fully vaccinated as fast as possible,” he said.
“But it’s hard to know for sure in a country where socioeconomic inequities run deep and where privately-procured-and-administered jabs have been available for months. As such, we can’t discount the worst-case scenario that vaccine inequity now poses a major hurdle in the way of widespread protection,” according to Chanco.
Pantheon Macroeconomics had forecast full-year GDP growth to slow to 4.5 percent next year — way below the government’s 7 to 9 percent goal for 2022– from 5.5 percent this year.