Economic uncertainty amid COVID-19 still weighing on household spending — report

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Metro Manila (CNN Philippines, October 14) — The uncertainty of when economies will fully reopen in countries such as the Philippines has affected demand among households, according to a think tank.

"For the Philippines, the proportion of households with savings has dropped remarkably," ANZ Research said in its latest report, noting this could have been "aggravated" by the milder pace in overseas worker remittances.

The Australia-based organization's report tackled the country's household demand, along with Indonesia's and Thailand's. Uncertainty on the reopening of their economies has "made a lasting dent" on the financial positions and incomes of families, it said.

"We now risk a durable suppression in household demand in Indonesia, the Philippines and Thailand. The scope and scale of pent-up demand waiting to be unleashed upon reopening could disappoint," ANZ Research said.

Households are also expected to rebuild their savings for now before spending again at pre-COVID-19 levels, and this could take years, it added.

ANZ Research likewise observed a "persistent slack" in the labor markets of the three Southeast Asian economies.

"The Philippines stands out with more than a quarter of its labour force un/underemployed for six straight quarters," the report read. The country's joblessness and underemployment figures have risen amid the pandemic as workers deal with firm closures, limited hours, and dampened consumer behavior.

With this, ANZ Research recommended a shift in the countries' policy framework towards bigger fiscal deficits, allowing monetary policy to finish normalizing much longer than expected.

"Indeed, in the Philippines, policymakers do not intend to reduce the budget deficit to their earlier target of 3% of GDP anytime soon. The deficit is expected to fall to 4.9% of GDP in 2024 from 9.3% this year - 2024 is the present horizon of fiscal planning," ANZ Research said.

In terms of monetary policy, the Bangko Sentral ng Pilipinas (BSP) has long maintained its accommodative stance in a bid to further encourage borrowing activity - hoping this would sustain economic recovery.

The BSP has so far injected over ₱2 trillion in liquidity to the country's financial system, and has kept the policy rate at its current 2% record-low since November last year.

While the economy grew by 11.8% from April to June, the Philippine Statistics Authority said economic output contracted by 1.3% from the previous quarter on a seasonally adjusted basis.