Weaker Philippine consumer confidence to dampen Christmas spending
MANILA, NNA - Even though an uptick is expected, consumer spending in the Philippines during the Christmas season is unlikely to be as upbeat as in previous years when the coronavirus situation has remained uncontained and people are still worrying about job uncertainty and pay cuts.
Economists and businesses expect December to see improved retail sales as the government gradually allows more public transport services to operate and relaxes restrictions on business activities of many industries.
Michael Ricafort, chief economist at the Rizal Commercial Banking Corp. (RCBC), said the expected decline in consumer spending may be mitigated if local and overseas Filipino workers hit by the coronavirus fallout tap their savings, severance or retirement compensation to spend for Christmas.
However, any anticipated increase is unlikely to reach pre-pandemic levels as people will still tighten their belts, said Ruben Carlo Asuncion, chief economist at the Union Bank of the Philippines.
In the consumption-driven economy of the Philippines, the Christmas season is the most important time for businesses to make the highest sales and profits.
But retailers are not expecting the expected rise in retail to offset any losses sustained since the second quarter, said Paul Santos, chairman of the Philippine Retailers Association (PRA).
Many retailers and supermarkets have turned to online platforms to help boost sales, but online earnings are unlikely to be enough to cover offset the losses.
“The bulk of our members’ businesses is still conducted at physical stores,” said Santos, adding that logistics problems have continued to affect delivery in the country.
The Philippines trade department is considering holding massive sales at malls in December. But Santos does not think that will help much.
Steven Cua, president of the Philippine Amalgamated Supermarkets Association, Inc. (PAGASA), said sales could only improve if the government gives another round of cash aid to both low- and middle-income earners.
The labor department said last week it will be distributing cash aid worth 13 billion pesos ($268.7 million) to two million workers who had lost their jobs.
Still, Steven expects Filipinos to cut down on gifts that they would normally buy for relatives, friends, officemates and “even total strangers in the season of giving and sharing.”
The government is encouraging companies not to hold office gatherings this year. For church services, only up to 30 percent of the venue’s capacity can be filled by visitors.
“As such, people need not buy more than their immediate family' needs this year. People will shun buying gifts for a whole big circle of people they care about with the pretext of trying to stay safe at home,” Cua told NNA.
Ricafort of RCBC also sees lower demand for some basic Christmas commodities as the restrictions on gathering size would still remain in place.
While the demand for non-essential items is likely to increase, essential items such as food will remain the top priority for Filipino consumers, said Asuncion of Union Bank. Food and seasonal items for the Christmas Eve midnight meal called Noche Buena are must-haves to most people.
But Cua of PAGASA believes Filipinos will rein in spending according to the amount of money they have available, be it from their salary or remittances from relatives working abroad.
“If less money is expected compared to last year, they will have to cut down on expenses by shopping in smaller quantities, go for substitute brands or products and scrounge for the best promo deals in town,” he said.
Some Filipinos are expected to cut spending if their employers have difficulty paying their salary and benefits.
In October, an employers group representing distressed small businesses appealed to the government to suspend the mandated 13th month pay to workers.
The labor department had proposed that the government subsidize companies for the extra pay, but the idea was rejected because of lack of funds.
Remittances from overseas Filipino workers have long cushioned the Philippines from economic shocks as they help to drive consumption. But this year, the pandemic has affected the jobs of many working overseas too.
Remittances fell by 4.1 percent in August. The Philippine central bank said the risks to remittances remain high due to the large number of repatriates, lower rate of deployment, and remaining coronavirus containment measures in host countries.
Asuncion of Union Bank, who expects consumer spending to fall by 2-4 percent this year, believes strong spending of pre-COVID levels will return once an effective vaccine is widely available and contributes to economic recovery.
“If consumers don’t see a light at the end of the tunnel, which is either the deployment of an effective vaccine or an effective and low-cost cure, it is going to be difficult to entice consumers to buy,” said Santos.
Consumer spending normally accounts for around 70 percent of the Philippine economy. The country’s GDP shrunk to 16.5 percent in the second quarter.
Household expenditure on goods and services for direct consumption contracted by 15.5 during the April-June period, according to data by the Philippine statistics authority.
Santos of PRA said worries about catching the deadly COVID-19 virus and not being able to keep one's job are still rife. Adding to the woes of many is their fallen total household income, he said.
“You may earn an income today. But three years from now, your company might decide to close and you end up with no income,” said Santos.
The results of a Philippine central bank survey on the level of consumer confidence reveal their pessimistic outlook for the remaining months of the year as they expect an onslaught of higher unemployment, reduced incomes and higher consumer prices.
Joice Adrada, a 27-year-old writer and video producer of online content, shares the same negative outlook.
In past Christmas seasons, Adrada would take her parents and younger sister to a big mall in Metro Manila to shop for gifts. But she is not so sure about doing the same thing this year.
“I need to save money. No one can tell what will happen the next day. The virus still exists and there are many new cases," she said.
Although coronavirus transmission in the Philippines has fallen by as much as 25 percent, many new cases still crop up with dozens of deaths reported daily.
The economic impact of the pandemic has hit blue-collar workers earning small pay and small businesses the hardest.
For Marlon Resma, who lives in the fringe of Makati city with his wife and young child, there is no money to save nor spend this Christmas.
He lost his job as a janitor cum messenger several weeks after the Philippine government imposed a strict lockdown in March.
Resma and his family have been surviving on help from relatives and the meager aid of 16,000 pesos from the government.
He is still trying to find a job so that he could have money for Christmas and New Year celebrations with the family. So, he might have to forgo spending on presents for the festive meals.
“I would buy diapers and milk for my baby first. Those are more important than presents,” he said.