Oxford Economics: Household consumption in PH will recover more slowly than most of its Asian peers
Manila, Philippines – Amid high unemployment and shrinking economies due to hard times caused by the COVID-19 pandemic, Filipino household consumption has been projected by UK think tank Oxford Economics as one of the slowest in the world. Asia this year.
In Asia-Pacific, most economies saw household savings increase last year, but for Oxford Economics, “most of the excess savings accumulated in 2020 will not be spent quickly.”
“Our baseline forecast assumes that households will treat these funds as wealth rather than income. Most of the savings were also accrued by higher income people, who tend to have a lower marginal propensity to spend, ”said Louis Kuijs, head of Asian economics at Oxford Economics, and senior economist. Lloyd Chan in a May 25 report titled “Asia-Pacific: How Households Unlock Savings is Key to Growth.”
“In 2021, we expect savings rates to decline, driven by pent-up demand, which will be supported by the recovery in jobs, incomes and vaccinations. However, the pace of the increase in consumption will vary from economy to economy, depending on income growth, savings behavior and health status, ”they said.
In the case of the Philippines, Oxford Economics projections have shown that private consumption is expected to grow by less than 3% in 2021, only exceeding growth forecasts of more than 1% for Japan.
In the first quarter of 2021, the Philippines had the highest unemployment rate among the 12 Asia-Pacific economies covered by the Oxford Economics report. The Philippines’ unemployment rate of 7.1% in March was nevertheless the lowest since the start of the pandemic, but unemployment likely resumed in April when the National Capital Region (NCR) Plus, accounting for half of the economy, has returned to two weeks of the strictest community quarantine (ECQ).
But in terms of the tightness of the lockdown, the Philippines has been placed by Oxford Economics at the bottom of the pack as the recent surge in COVID-19 cases in Taiwan, Vietnam, India, Hong Kong, Malaysia, Indonesia, in Thailand, Japan and Singapore prompted authorities in those countries to impose stricter quarantines compared to restrictions last year.
Amid the region’s longest COVID-19 quarantine, nominal disposable income in the Philippines in 2020 fell by around 8% – the largest in Asia-Pacific, according to estimates from Oxford Economics and Haver Analytics.
As the national economy was expected to begin to recover from the pandemic-induced recession, Oxford Economics expects nominal disposable incomes in the Philippines to increase by more than 5% in 2021.
However, the estimated household savings rate of around 5% for the Philippines in 2021 would not only be the lowest in the region, but would also fall below the 2018-2019 averages before the pandemic and during the height of the pandemic. COVID-19 crisis in 2020.
“In Thailand, Indonesia and the Philippines, households appear to have dipped into their savings, causing their savings rate to drop,” Oxford Economics said.
The latest government data showed household consumption – which made up about three-quarters of the economy before the pandemic – contracted 4.8% year-on-year in the first quarter, although it was down slower compared to previous quarters due to restrictions on movement of people and goods as well as economic activities gradually eased.
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