Consumer and retail sector to bear the brunt of month-long ECQ, says think tank

MANILA, Philippines — The country’s consumer and retail industry is expected to be one of the hardest hit sectors caused by the month-long enhanced community quarantine (ECQ) in Luzon, a think tank disclosed in its research released Wednesday.

In a research note, Fitch Solutions said that spending for food and drinks as well as health is expected to increase, but other consumer spending categories including clothing and footwear, furnishing, transport, recreation and culture, and restaurants and hotels are seen to decrease.

Fitch Solutions noted that like residents in other countries under lockdown, Filipino consumers prioritize essential purchases while the ECQ is in effect.

The Luzon-wide ECQ started on March 17, and will end at midnight of April 13.

“With consumers essentially confined to their homes, we have revised down our total household spending for 2020 to expand by just 6.7% y-o-y (year over year), down on our pre-coronavirus projection for 2020 of 7% growth y-o-y and below the 9.8% y-o-y growth recorded in 2019,” it also said.

The think tank made this forecast noting that Luzon comprises more than half of the Philippines’ population and accounts for 73 percent of the country’s global domestic product (GDP).

Fitch Solutions noted that it has validated its predictions that consumers under lockdown prioritize essential spending, such as food, drink, and health, over all other categories, based on its recent analysis of retail data released from China, and of the preliminary data from South Korea under the implementation of social distancing measures there.

“We expect this to hold even for non-essential e-commerce shopping online (e.g. for clothing and footwear), due partly to the aforementioned ‘prioritising’ mindset amongst consumers, and partly due to delivery companies prioritising the delivery of the increased essential food and grocery orders over those of non-essential goods,” it added.

With this forecast, Fitch Solutions said that non-essential businesses “will suffer,” as they lose an entire month’s worth of sales revenue, but said that some retailers may still be able to generate sales if they get onto delivery platforms.

Edited by JPV