FILIPINO household spending is expected to slow down this year as consumers cut purchases on non-essential goods such as clothing, footwear and appliances.
Consumers are prioritizing spending on food, beverage and health items as the strict mass quarantine forces them to cook at home and stay healthy.
Think tank Fitch Solutions estimates spending in the country to grow only 6.7 percent, down from its initial estimate of seven percent and 9.8 percent it posted in 2019.
Retail player Robert Go said the shopping behavior of Filipinos is focused on basic goods nowadays as the coronavirus outbreak has taken a toll on the financial health of most consumers.
“The retail sector in Cebu is suffering low sales especially in the fashion and personal care, home products and other non-essential items,” said Go, who owns a supermarket chain.
According to Fitch Solutions, the spending slowdown is also seen to hold even for non-essential e-commerce shopping for clothing and footwear partly due to the “prioritizing mindset” among consumers.
Fitch also attributed this to delivery companies prioritizing the deliveries of food and grocery items over those of non-essential goods.
The global think tank’s latest assessment on Filipino consumption activity was based on the spending patterns observed during the China lockdown in January and February and the social distancing measures in South Korea.
Go, who represents the Philippine Retailers Association in Cebu, said retailers had been cutting costs to sustain their operations until sales bounce back.
But that remains uncertain for now.
“This is a time for belt tightening. Every retailer is just on a guessing game, on hoping and praying that sales will not be down too long,” the businessman said.
The capital region, Cebu and other provinces are currently placed under an enhanced community quarantine to contain the viral outbreak, pushing most businesses to close down temporarily.
Fitch Solutions noted that the country’s first fiscal stimulus package of P27.1 billion may not have a “considerable” impact on the consumption-led economy.
The P27.1 billion stimulus program announced by economic managers was focused on supporting the tourism sector. It also includes a package for the health sector and some subsidies for affected workers and establishments.
Moreover, the P200 billion package for vulnerable Filipinos announced by President Rodrigo Duterte on March 30, 2020 may boost the consumer spending outlook in the second half of 2020 and in 2021, it said.
Fitch Solutions downgraded its 2020 growth outlook for the Philippines to four percent in late March from an earlier forecast of six percent mainly due to the outbreak’s impact on tourism, remittances, the supply chain and foreign direct investment.
If realized, this projection will be lower than the 5.9 percent recorded in 2019 and the government’s official target of 6.5 to 7.5 percent this year.