More PH households save, not spend

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The tougher times caused by the protracted COVID-19 pandemic have forced more households, including those receiving Filipino Worker Overseas (OFW) remittances, to save instead of splurging, resulting in slowed the economic recovery due to weak domestic consumption, believes the UK. Pantheon reservoir Macroeconomics said.

In a report released on Monday, Pantheon Macroeconomics senior economist for Asia, Miguel Chanco, noted that remittances exceeded expectations in July, as they rose 2.5% to a high in July. seven months of $ 2.85 billion, defying most economists’ expectations of a year-over-year decline.

Chanco also noted that on a month-over-month basis, remittances in July were up 0.4% from those in June, when many OFWs typically send money home to be spent on the education of their children before the opening of classes.

The latest data from Bangko Sentral ng Pilipinas (BSP) showed remittances at the end of July increased 5.8% year-on-year to $ 17.77 billion.

“The recent momentum is largely due to transfers from the United States, where the job market is resisting pressure from Delta,” Chanco said.

Weaker peso

“For the first time since 2019, peso inflows are growing faster – which matters more to domestic demand – due to the currency’s recent massive sell-off,” he added, referring to the weaker peso. .

But Chanco said those remittances “are still not increasing quickly enough to provide meaningful support, and the deteriorating image of COVID-19 locally means that remittances are more likely to be saved than spent. “.

Chanco earlier highlighted the declining proportion of consumers who have refrained from buying large tickets like vehicles and goods amid the pandemic, as evidenced by the BSP’s Quarterly Consumer Expectations (CES) survey.

Chanco had also noted that while many households intended to save more money for a rainy day, some could not afford to keep savings due to high unemployment due to the extended quarantine restrictions and the economic stagnation induced by the pandemic.

It didn’t help that consumer prices were high and may even increase in the coming months.

Chanco said in a report last week that headline inflation could end 2021 above 6%, much faster than the BSP’s 2-4% target range.

He noted that the 3.9% inflation rate, the 32-month high in August, was mainly due to food inflation of 6.5%, the six-month high.

“This re-acceleration has yet to continue, as the country has yet to feel the full force of the spike in global food inflation, which is about six months ahead. Granted, international prices are now starting to cool, but this is unlikely to be felt before the start of the year, ”Chanco warned.

“Likewise, the pass-through effects of the recovery in global oil prices to date are far from over… Housing and utility inflation still has a lot of room for catching up, its increasing contribution to inflation. overall, almost doubling at the start of 2022, ”he added.

Chanco predicted that the rate of increase in commodity prices would reach 5.2% year-on-year in September and 6.5% in December. INQ

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