Revenge Spending Boosting Economy
Most businesses reported strong recovery in 2022 as the so-called consumers’ revenge spending lifted sales. This phenomenon continued in the first quarter of 2023 and will likely persist if we can keep Covid cases manageable, without resorting to border restrictions again.
While the government lifted the mask mandate, it would be wise for many of us to continue wearing face masks, especially in public places, so that we could avoid spreading the disease. It is better to wear masks than being stuck in our homes or isolation centers again.
As restrictions eased last year, Filipino consumers were eager to go out and spend for shopping, dining and travel. The increased spending helped many establishments reopen and rehire employees. More people were employed and their salaries recirculated in communities that lifted the economy. A major restaurant chain, for example, posted an all-time high net income in 2022, fueled by the resurgence in dine-in sales as people went out of their homes.
Many other industries have benefited from revenge spending. It lifted the income and revenues of restaurants, banks, retailers, property developers, transportation companies, tourism establishments, car dealers, utilities and even government-owned and controlled corporations.
One industry that felt the full impact of economic reopening is tourism. Per the Department of Tourism, international visitor arrivals jumped by more than 10 times in the first quarter of 2023 to 1.39 million from just 102,031 in the same period in 2021 when border restrictions were still in place.
The DOT now expects to welcome 4.8 million visitors in 2023, up from 2.65 million in 2022 from just 163,879 in 2021 and 1.48 million in 2020. Of course, we still have a long way to match the 8.26 million arrivals registered in 2019 before the onset of the pandemic.
Filipinos are also now traveling abroad. VFS Global, an outsourcing and technology services provider for the travel sector, reported that the number of visa applications in the Philippines this year is now close to pre-pandemic levels because of easing health protocols not only in the country but also overseas.
Domestic tourism is on its way to a full recovery, with local airlines reporting flights that were full during the Holy Week. Philippine Airlines, Cebu Pacific and AirAsia reopened international and local routes as they expect travel bookings to pick up in the coming months. PAL, for one, reported an average passenger load factor of 80 percent in the first quarter of 2023, which is a healthy signal for its financial performance.
Hotels and resorts were also buoyant, with many of them full to the brim this hot dry season.
The recovery transcends tourism and spills over to the property sector, with the residential, commercial and industrial spaces announcing strong demand. Real estate prices were recovering, and developers began to upscale their offerings with bigger lot sizes and floor areas in response to the lessons from the pandemic.
Developers are bullish because of robust demand, stable economy and a vibrant banking sector—all made possible by the growth momentum, return to “normalcy” and revenge spending. Demand for office space is also picking up as many employees return to work after more than two years of working from home or adopting a hybrid setup.
The IT & Business Process Association of the Philippines, a group of BPO companies, anticipates that more than 1 million employees will join the sector in the next five to six years. That will require an entire city of skyscrapers to accommodate.
Shopping malls and retail outlets also enjoyed brisk sales last year. A luxury retailer reported strong profit in 2022 on the back of a 54-percent increase in sales, which reflected Filipino consumers’ spending prowess. Both brick-and-mortar and e-commerce sites registered higher sales in 2022.
Car sales shot up more than 30 percent in the first quarter of 2023, as the automotive industry took advantage of the thriving consumer demand for new vehicles.
As more cars were on the road, Nlex Corp., which operates the North Luzon Expressway and Subic-Clark-Tarlac Expressway, posted a 35-percent growth in net income in 2022 as revenues rose 29 percent. Higher traffic figures because of revenge travel and toll rate adjustments boosted its bottom line.
The expansion of businesses and industries had a profound impact on the economy in terms of job generation. The Philippine Statistics Authority reported that employment in the country increased 3.32 percent to 48.8 million in February 2023 from 45.48 million a year earlier. The unemployment rate dropped to 4.8 percent from 6.4 percent in the same period.
The latest figures suggest that the labor market is steadily recovering following the lifting of various restrictions that previously impeded employment opportunities.
I am hoping that these positive data will continue as we avoid locking down the economy again to contain the spread of the virus. It may be too early to declare a victory against Covid-19 but our workers and the rest of the Filipinos showed that the battle can be won through discipline and a united effort.