(Bloomberg) — Christmas is usually when Ajr Gie de Guzman gives the children in her family up to 2,000 pesos ($42), a traditional cash gift in the Philippines known as “aguinaldo.” But after taking a buyout from her job as a hotel sales executive amid the coronavirus crisis, there won’t be such cheer this season.
“Since the pandemic started, I’ve been very strict about spending my money,” said de Guzman, who’s now selling bags and perfumes online. “I will have to tell the kids that I’m sorry, and they will have to wait for next year for their gifts.”
That kind of scrimping is being repeated across the Philippines, where consumer confidence this year plunged to a record low, threatening a recovery in a nation where household spending represents more than 70% of the economy.
Already home to Southeast Asia’s deepest economic slump, the Philippines is tipped by analysts to lag the region’s rebound.
Virus Hits Philippines Growth Outlook Most Across Southeast Asia
“The recovery will be slow and difficult,” said Alex Holmes, economist at Capital Economics Ltd. “Business insolvencies, weaker household balance sheets and high unemployment will weigh heavily on demand for many months to come.”
The Philippines’ slide in private consumption was among the biggest among major Southeast Asian nations last quarter, according to data compiled by Bloomberg. Filipinos aren’t purchasing non-essential goods from clothing to cigarettes, said Economic Planning Undersecretary Rosemarie Edillon, and they aren’t dining out despite looser virus restrictions.
While the nationwide jobless rate eased to 10% in July from April’s record, it rose in the Manila capital region, which represents about one-third of the economy. As well, the number of Filipinos working less than 40 hours rose 53% during the period. With millions jobless and business operations still limited, it will be challenging to encourage consumers to spend this quarter, Edillon said.
“Household income has been eroded,” the nation’s inter-agency Financial Stability Coordination Council said in a report released Nov. 18, citing lost time at work. “There is also the question of whether the cash flows can be reinstated in the future.”
Millions of Middle-Class Southeast Asians Falling Into Poverty
Last year, 32-year-old Edward Almeda left an advertising job to start a small food business. While orders still flowed after restrictions to fight the pandemic were put in place, competition has since stiffened, he said, as customers skimped and the jobless turned to home-based businesses for money.
“I’m now wiser about spending,” Almeda said. To help save money, he said he’s unsubscribed from streaming services like Netflix and Spotify and has canceled his credit cards.
To support the economy, the government is further easing curbs on movement as the increase in daily infections slows. The central bank has also lowered its key interest rate by 2 percentage points this year and boosted money supply. But analysts and businessmen say the country needs more fiscal stimulus.
“Unless fiscal spending is unleashed, domestic demand will remain soft,” said Eugenia Victorino, Asia strategist at Skandinaviska Enskilda Banken AB in Singapore. A series of typhoons which hit the main island of Luzon will put more pressure on growth, she said.
The government has been reluctant to marshal fiscal stimulus, citing the need to protect the nation’s credit ratings. Instead, it plans to cut corporate income taxes to spur growth. President Rodrigo Duterte’s also pinning his hopes on a vaccine, with the government in talks with pharmaceutical companies to secure doses.
Almeda, who’s been seeking a graphic design job for months, isn’t optimistic.
“It’s really hard to look for work now,” he said. “This is looking like a long crisis.”
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