MANILA - Fitch Solutions on Thursday said the Philippines may have to wait until next year for consumer spending to fully recover as the country lags behind its neighbors in COVID-19 vaccination.
Fitch Solutions Country Risk & Industry Research said real household spending in the Philippines is expected to grow 4 percent year-on-year in 2021, after contracting 8.3 percent last year.
For 2021, total household spending, in real terms, is seen hitting P10.6 trillion, which is still below the P11.1 trillion booked in 2019, the firm said.
The company noted that the Philippines' vaccination drive lags behind the wider Asia region, with just 9.9 percent of the population having received at least one dose on July 23.
“As such, we believe that most COVID-19 related restrictions will only be removed in the late 2021, allowing for continued consumer spending growth in 2022, reaching 5.1 percent year on year.”
The company said a notable recovery in consumer spending rests on vaccinating a large enough proportion of the population, which leads to a notable drop in COVID-19 infections and a decline in hospitalization rates.
Fitch Solutions said it believes that a full recovery of the Philippines' consumer and retail sector will only take place in 2022, with conventional growth returning in 2023.
The government has said that it aims to fully vaccinate 58 million Filipinos to achieve "population protection" by the end of the year.
ABS-CBN's vaccine tracker shows that only 7,277,312 individuals have been fully vaccinated as of July 28, representing just 12.55 percent of this target, almost 5 months after the rollout of the vaccination drive.
Fitch Solutions added that its projected improvement in consumer spending in the Philippines this year is in line with its forecast that the Philippine economy will grow 5.3 percent
“The main driver of economic growth is the rebound in consumer spending, which contributes 73.5 percent of GDP in 2021.”
While inflation remains a risk, Fitch said it projects that inflation already peaked in the first half and that “these levels of inflationary pressures will derail our consumer outlook.”
There were improvements in the country’s employment situation, Fitch also noted, with unemployment down to 8.7 percent in the second quarter of 2021 from a high of 17.6 percent in 2020.