Revenge Spending and the Economy
You can never tell the rush hour in the country this Christmas season anymore. Roads, especially in Metro Manila, are jam-packed with motorists all day long, while malls are filled to the brim.
Revenge spending is very evident among Filipino consumers, after nearly three years of mobility restrictions. This spending spree has created monstrous traffic jams, but it is an unmistakable sign that the Philippine economy is in the pink of health.
More telltale signs are emerging that the economy is on a solid path to recovery despite lingering challenges, such as the elevated inflation rate that prompted the Bangko Sentral ng Pilipinas to adjust interest rates again.
Among these compelling indicators in the fourth quarter are the robust growth of exports, double-digit increase in vehicle sales and the frenzied holiday spending. We have a rapidly growing economy, which no less than the Asian Development Bank has recently affirmed.
Exports in October surged 20 percent year-on-year to a record $7.7 billion. If the trend continues, our fourth-quarter gross domestic product growth could exceed the 7.6-percent expansion registered in the third quarter.
The growth of October exports rode on the back of a 39.6-percent increase in sales of electronic products overseas. Electronics exports amounted to $5.10 billion in October and accounted for 66.3 percent of total exports during the month.
The cumulative export earnings in the first 10 months of 2022, per the report of the Philippine Statistics Authority, grew 6.3 percent to $66.01 billion from $62.10 billion in the same period last year. Imports of merchandise goods, meanwhile, rose 7.5 percent in October to $11 billion and by 22.7 percent in the first 10 months to $115.90 billion, as we purchased more fuel, machinery, transport equipment, raw materials and capital goods to kick-start our economic recovery this year.
Industry associations reported that sales of motor vehicles increased 34.2 percent in November to 34,037 units from 26,456 in the same period last year. Automotive sales recorded double-digit growths for nine straight months and may exceed the industry forecast of 336,000 units this year.
Total sales in the first 11 months of 2022 reached 315,337 units, up 31 percent from 240,742 vehicles delivered in the same period in 2021, underscoring the Filipino consumers’ pent-up demand, supported by improved business confidence and more relaxed mobility this year. Auto sales are a critical economic indicator—they provide a snapshot of consumer demand for big-ticket items, such as property.
Revenge travel is fueling the growth of the transport sector. An average of 417,000 vehicles used Edsa on a daily basis in November and could reach 430,000 ahead of the Christmas celebration, per the report of the Metropolitan Manila Development Authority. Both numbers already surpassed the pre-pandemic level of 405,000 vehicles using Edsa in 2019.
Revenge travel likewise boosted inter-island traffic, now nearing pre-pandemic levels. The Philippine Ports Authority predicted that inter-island traffic using Philippine ports could more than double to 57 million in 2022 from just 23 million in 2021.
Airlines are reopening international and domestic routes, as demand continues to rise, an evidence of the recovery of the tourism and travel sector.
Philippine tourism generated P100 billion in receipts as of Nov. 15 since the government eased the border restrictions on foreign tourists on Feb. 10, 2022. International visitor arrivals breached the 2-million mark as of mid-November, exceeding the department’s full-year assumption of 1.7 million.
The reopening of the economy led to more business activities and stronger consumer demand. As a result, more Filipinos found jobs this year, with the unemployment rate down to 4.5 percent in October.
Given these latest data, the ADB, the Manila-based regional lender, has forecast that the Philippine economy may grow faster than previously anticipated, backed by strong domestic demand, rising employment and a recovery in tourism.
The ADB, in its latest supplement to the Asian Development Outlook 2022, now sees the country’s gross domestic product expanding 7.4 percent in 2022, faster than its September forecast of 6.5 percent. The multilateral bank upgraded its 2022 growth outlook for the Philippines, while lowering its estimate for other Asia-Pacific countries, underscoring the resilience of the local economy in the face of challenges, such as monetary policy tightening by central banks globally, the protracted Russian invasion of Ukraine and recurring lockdowns in China.
The favorable economic trend in the Philippines gives us enough reason to celebrate the Christmas season with greater optimism this year.