ASEAN'S consumer sector is set to have a soft start to 2020, with the outlook "dampened by macro headwinds and soft consumer sentiments", according to a Jan 6 DBS Group Research report.
The Philippines seems like the main outlier, with an expected rebound after consumption was hit in 2018-2019.
Even though Singapore, Malaysia, and Thailand are expected to see a pick-up in gross domestic product growth this year, this will still be below the countries’ historical trend, said the DBS analysts.
Retail sales were largely down in 2019, with the DBS analysts believing that the weak economy contributed to poor discretionary spending, with more spending going towards consumer staples such as food.
But with signs of bottoming out in the manufacturing sector, growth is expected to rise to 1.4 per cent in 2020, improving from a projected 0.6 per cent in 2019.
Growth is likely to come in at 4.6 per cent in 2020, below the official 4.8 per cent target.
Consumer sentiment, meanwhile, has been on the decline since the recent high of Q2 2018. The DBS analysts see this as being due to slowing economic growth; concerns over job prospects and income growth; volatility in the ringgit; and high household debt.
"After holding up well earlier in 2019, consumption is now showing signs of strain, as reflected by weak car sales, tepid farm incomes and sluggish confidence indices," said the report.
Despite an expected improvement in growth and a lift from stimulus measures directed at farmers, consumption is still seen as staying below long-term trends. The most recent Consumer Confidence Index in November 2019 showed a steady decline since February.
"The Philippines economy will start off stronger in 2020 as major risks such as high inflation, tight monetary policy and government budget delay have subsided," said the report.
Growth is set to rise to 6.3 per cent, from 5.9 per cent in 2019, with private consumption staying robust due to inflation having cooled significantly.
Consumption is expected to stay resilient, though down from 2019. Inflation is set to rise in 2020 with government adjustments to the electricity tariff, cigarette excise, as well as diesel and liquefied petroleum gas subsidies.
Vietnam bucked the regional trend in 2019 with accelerating growth. In 2020, full-year growth might come in at 6.9 per cent, from 7.1 per cent in 2019.
"Despite weaker export demand from China, Vietnam is experiencing a sharp spike up in export sales to the US, as well as exceptionally strong FDI inflows, which boosted domestic demand and economic growth," said the report.