Bill shock disrupts Filipino consumer recovery as lockdown eases

by Prinz Magtulis (Philstar.com), 12 May 2020

MANILA, Philippines — As the Philippines slowly re-opens its economy from stringent lockdowns, the government is banking on resilient Filipino consumers to propel a quick recovery from the outbreak, but unpaid bills that piled up are likely to get in the way.

Household bills, from utilities to loan payments, are haunting back consumers, some of whom lost their jobs during the two-month movement restrictions in Luzon and other parts of the archipelago that started to ease last May 1.

This is bad news for economic officials led by Finance Secretary Carlos Dominguez III, who are banking on consumers, composed mainly of young and abled workforce, to push up the country’s gross domestic product (GDP) that contracted 0.2% in the first quarter, a first in more than 21 years.

“Our main problem is people are not buying things because their incomes have gone down. Because if they don’t buy things, it’s useless to stimulate the companies. We have to stimulate the man,” Dominguez said in a pre-recorded briefing early Tuesday.

Consumption, which typically accounted for 70% of GDP, inched up to a measly 0.2% in the first three months, the weakest reading since the fourth quarter of 1985 as people stuck at home were prevented to go to closed business establishments during the Luzon community quarantine that started March 17.

The lockdown extended tax payment deadlines to June 15, while also mandating private utility firms such as power and telco companies to lengthen their grace period for bills, as well as banks on their loans. This helped families, battered by slowing remittance inflows, spend more on basic necessities like food and medicine, supporting consumption.

But payment extensions are slowly unravelling, partly because the law that prescribed them is about to lapse in June, unless extended, while officials begin to discuss relaxing movement prohibitions.

Skyrocketing bills

At the Manila Electric Co. (Meralco), consumers have started to air their complaints online over an unusual spike in their May power bills, a direct effect of postponing meter readings in March and April when the lockdown was enforced stringently.

At the time, Joe Zaldarriaga, the company’s assistant vice-president for public affairs, said Meralco opted to average consumers’ consumption on the three months to February and the amount was what reflected on bills in March and April. As meter readings resumed this month however, actual consumption in previous two months were charged on top of May usage.

“The March and April bills can be paid in four equal installments starting no earlier than May 30. We will send the bills that will show their installment scheme,” he said in a Viber message.

He explained further: “The (average) of past three months— December 2019, January 2020, and February 2020— were considered ‘low consumption’ months as these were significantly cooler months compared to the summer months of March, April and May.”

Ayala-led Globe Telecom Inc. is likewise preparing a “deferred/installment plan” for its customers soon to help them “manage their cash flow” once the extension on settling mobile phone bills expires on May 15, said Ma. Yolanda Crisanto, senior vice-president for corporate communications.

Suzanne Felix, executive director at Chamber of Thrift Banks, an industry group, said lenders which cannot charge penalties on delayed loan payments are likewise “extending loan maturities” for their clients to prevent a bill shock.

But for Alvin Ang, economist at Ateneo de Manila University, payment extensions are not enough, calling on the government or the private sector to subsidize “at least a portion of the bills” to help consumers get back on their feet.

There is precedent to this during the Arroyo administration when the government gave out P500 power bill subsidy to consumers, as well as P2 per liter discount on fuel purchases during the global financial crisis of 2008.

“The discount will be a long-term solution because until you have some people get back to income generation, and earn something, then you wouldn’t really see consumption recover,” Ang said in a phone interview.