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ASIAN INTELLIGENCE An Independent Fortnightly Report on Asian Business and Politics No.
1,086 Wednesday February 23, 2022 REGIONAL OVERVIEW ..................... 2 PHILIPPINES ....................................... 9 CHINA .................................................... 3 SINGAPORE ........................................ 10 HONG KONG ........................................ 4 SOUTH KOREA .................................. 12 INDIA ..................................................... 5 TAIWAN .............................................. 13 INDONESIA .......................................... 6 THAILAND .......................................... 14 JAPAN .................................................... 7 VIETNAM ............................................ 15 MALAYSIA ............................................ 8 EXCHANGE RATES ........................... 16 POLITICAL & ECONOMIC RISK CONSULTANCY LTD. Asian Households Start to Spend More(annual increase on consumer spending)-25-20-15-10-50510152025Percent Political & Economic Risk Consultancy, Ltd. Issue #1,086 REGIONAL OVERVIEW Changing trends in private consumption in Asia COVID-19 has reshaped private consumption patterns by forcing households to adjust to job losses and income declines.
Lockdowns, social distancing, and stay-at-home orders changed what and where people ate; where they studied, exercised, and entertained theselves; and how they interfaced with colleagues and friends.

in a decrease initially resulted With very few exceptions, the emergence of COVID-19 in household consumption, regardless of country.

Spending has decreased in all industries, with the exception of food consumed at home and some electronic products.
Retail sales have also shifted from physical stores to online transactions.

Large traditional retailers have been investing in online businesses, while big online companies have been investing traditional physical stores.

Thousands of small, local neighborhood stores have been forced by the lack of business to close, but many local shops have survived by entrepreneurial developing different types of home-delivery businesses.
Large department stores have been forced to make similar innovations to expand their channels for getting goods to customers.

in more The country entries that follow look at retail sales trends and changing consumer habits.

One common theme that emerges is the way online sales have been given a big boost by the pandemic.

Another is the way COVID fatigue seems to be growing in many countries.
This is reflected by the way households began the pandemic cautiously, cutting back unnecessary spending and often switching to cheaper brands.

However, last year consumer spending began to recover even though new strains of the virus led to new waves in which the total number of people inflected jumped.

In a few countries, like South Korea, consumers even began to rebel against cheaper brands and showed a penchant for spending more on imported luxuries.
Last year’s rapid increases in consumer spending are unlikely to be sustained in most countries in 2022 even if COVID lessens as a problem and social distancing and other restrictions are eased.

That is because much of the acceleration in retail sales growth last year was due to the depressed base from which the increase took place.

Last year’s results were being compared against an historically poor year in most countries.

This will not be the case in 2022.


The base of comparison will be higher, which probably means slower consumer spending growth rates.

As consumer spending strengthens, there is likely to be a swing back to old spending patterns.

This will not be the case in some sectors like transport and businesses dependent on foreign tourists.

Recovery here will be slower and take longer.

However, in most countries people will go out more to restaurants and bars.
They will resume sports and exercise patterns they had to forego during the pandemic.

The return to physical classes will probably be accompanied by a decline in both time and money spent on online learning programs.

However, some of the spending patterns that were interrupted by the pandemic could result in new habits that last long after COVID is no longer a factor influencing spending.

Before the pandemic, daily routines were full of encounters with other people.
Communication meant meeting in person, and consumption and entertainment also required contact.

The post-COVID era, while not as “contactless” as practices during the height of the pandemic, is likely to involve more caution in face-to- face encounters.

Some people will prefer to keep shopping online instead of returning to crowded department stores.

Many people will not want to return to offices fulltime and will insist on being able to spend more time working remotely.
Instead of traveling and conferences, people will weigh more carefully if the same results could not be achieved through conference calls and Zoom meetings.

attend physical meetings to In general, Asian governments took a more cautious approach to dealing with COVID than did governments in the US and EU.

For example, they did not transfer as much cash directly into the hands of individuals as most Western governments have done.
Instead, they concentrated more on sustaining employment by helping small- and medium-sized Page 2 ASIAN INTELLIGENCE February 23, 2022 Issue #1,086 Political & Economic Risk Consultancy, Ltd. companies survive the pandemic.

Still, this fiscal help was expensive, causing most Asian governments to run larger fiscal deficits than they historically have felt comfortable shouldering.

The Singapore government has just announced a new budget for the coming fiscal year.
If its conservative approach is followed by most other governments in the region, which is very possible, this means most governments will be raising various kinds of taxes to improve their fiscal positions.

These new tax initiatives are likely to have a dampening impact on consumer spending when they do occur – which will probably be in 2023 and 2024 rather than in 2022.

If this comes to pass, it could mean that the growth of consumer spending will have limitations for the next few years.
They will not prevent economic recoveries, but they will limit their magnitude and perhaps take some of the shine off Asia’s pre-COVID reputation for being the most rapidly growing consumer market in the world.

CHINA Comments from a Instead of accelerating dismal year in 2020, as most economists were forecasting, the growth of retail sales of consumer goods in China has been decelerating since last March.
By the end of 2021, retail sales were running just 1.7% in nominal terms above their level of December 2020.

To be sure, for the entire calendar year, retail sales of consumer goods rose 12.5% to Rmb 44,082.3 billion (US$6,935.7 billion).

This was up from a decline of 3.9% in 2020, but it is the decelerating trend on which economists are now focused.

of consumer spending is reflected in other In national accounts measures as well.
terms, wholesale and retail trade together rose just 5.9% y-on-y in the fourth quarter, whereas the average growth rate for the full year was still 11.3%, Moreover, initial indications are that the deceleration has intensified in the first quarter of this year.

Households are also slowing their spending on services, which are not reflected in most retail statistics, which are confined to goods.
Again in national accounts terms, the accommodation and restaurants sector rose just 4.7% on the year in October-December, compared with a full year expansion rate of 14.5%.

continuing weakness The There are several reasons why consumer spending has been disappointing in China and why sentiment is as weak as it is.

Most relate directly or indirectly to COVID.

A series of domestic virus outbreaks have dragged down domestic consumption.
Incomes have stagnated, with low- and middle-income Chinese feeling the pressure most, since this is where wage cutbacks and job losses have been most severe.

Another reason is because cost-of-living expenses have risen, particularly for rent and food.

This has further hit the wallets of lower- and middle-income households.
By sector, consumers have maintained their spending on food and clothing, rather than on services such as education and entertainment Some industries have been hurt harder than others by the pandemic, and individuals that depend on these industries are having to be especially careful in their spending.
Top on this list are Chinese dependent on Februry 23, 2022 ASIAN INTELLIGENCE Page 3 Chinese Consumers Remain Wary(year-on-year change in retail sales of consumer goods change)-20-10010203040Feb-19Apr-19Jun-19Aug-19Oct-19Dec-19Feb-20Apr-20Jun-20Aug-20Oct-20Dec-20Feb-21Apr-21Jun-21Aug-21Oct-21Dec-21PercentSource: National Bureau of Statistics of China Political & Economic Risk Consultancy, Ltd. Issue #1,086 tourism, immediate prospects for which remain bleak.
The crisis facing the real estate industry has also dampened the willingness of many Chinese to risk buying property right now.

New construction starts by property developers dropped 11.4% in 2021.

In national accounts terms, the real estate sector grew 5.2% last year, but that was entirely in the first part of the year.

By the fourth quarter, the real estate sector had contracted a real 2.9% from the like span of 2020.

This year has started off even worse.


Total contracted sales of the country’s 100 largest developers saw a year-over-year drop of nearly 40% in January.

In turn, the weakness in real estate has had negative fallout on other related industries.

For example, in the December-over-December period, retail sales of household appliances were down 6.0% and those of furniture fell 3.1%.

The government has focused economic programs to support businesses rather than consumers.
In their statements, China’s leaders say they want to do more to reduce income inequalities, but most recent actions have been directed at investing more on infrastructure without adding to debt, cutting interest rates to get companies to invest more, and smoothing the reorganization of failed companies like property developer Evergrande.

The government has even acted in ways that have curbed the strongest retail segment, online sales.
In 2021, national online retail sales reached Rmb 13,088.4 billion (US$2,059 billion), an increase of 14.1% over the previous year.

Among them, the online retail sales of physical goods were Rmb 10,804.2 billion, an increase of 12.0%, accounting for 24.5% of the total retail sales of consumer goods.

Among the online retail sales of physical goods, food, clothing and consumer goods increased by 17.8%, 8.3%, and 12.5%, respectively.
However, Xi Jinping’s efforts to extend the authority of the Communist Party and the State over every aspect of life have included a crackdown on the activities of the country’s biggest private tech companies, which have been responsible for rapid growth of online business.
Industry-wide statistics are hard to come by, but it is clear that the growth rate of retail sales of some of the biggest online companies like Alibaba, Baidu, and Tencent have slowed sharply since last Summer, when the crackdown really intensified.

In some cases, the firms have actually been banned from accepting new business.

It is doubtful that the regulatory assault will lessen significantly in 2022.

The government has other priorities.


HONG KONG Comments Due to the disruption caused by social unrest, Hong Kong’s retail sector was already hurting before the COVID-19 pandemic hit in early 2020.

After growing 8.7% in 2018, the value of retail sales fell 11.1% in 2019.

Then COVID struck and retail sales slumped a further 24.3% in 2020.

Last year they began to recover, with retail sales up 8.1% to HK$353 billion in value and by 6.5% in volume over 2020.
The biggest single impact on retail spending during this period was the disappearance of foreign tourists.

This hit department stores and jewelry shops the hardest, which is reflected by the slump in the share of sales of jewelry, watches & clocks, and other valuable gifts to total retail sales from over 20% p.a.

in the 2011- to-2015 period (before any demonstrations began to disrupt daily life) to only 9.3% in 2020.
There was a bit of a recovery in this type of spending last year to 11.0% of total retail spending, but this was due almost entirely to higher sending by local residents than by tourists, who remain largely absent from the local market.

Local residents have been limiting their spending too.

In part, this was due to lockdown and social spacing restrictions.

The value of sales of commodities in supermarkets decreased by 8.4% in 2021 compared with 2020.
This was followed by sales of food, alcoholic drinks and tobacco (-2.7% in value); and commodities in department stores (-3.3%).

On the other hand, local residents have stepped up their spending on electrical Page 4 ASIAN INTELLIGENCE February 23, 2022 Issue #1,086 Political & Economic Risk Consultancy, Ltd. goods and other consumer durables not classified elsewhere.

They grew 19.1% in value last year and raised their share of total sales to 11.9%.
Consumers in Hong Kong have reduced their spending on significantly luxury and non-essential goods and have re- allocated this spending to essentials such as groceries.

The most noticeable change in local consumer spending patterns was how residents have increased their reliance on the internet and online purchases during the pandemic.

The value of online retail sales in 2021, provisionally estimated at HK$28.6 billion, increased by 39.0% over 2020.
In 2020, the first year of COVID, consumers postponed big purchases.

This was reflected by the 7.9% drop in motor vehicle sales in 2020, while sales of furniture for households stagnated.

In contrast, last “COVID year there were indications fatigue” setting in, as evidenced through a slight recovery in spending on durable goods.

Local residents raised their spending on motor vehicles by 13.7% and on furniture by 5.3%.
of The retail sales statistics noted above cover consumer spending on goods but not on services (such as those on housing, catering, medical care and health services, transport and communication, financial services, education and entertainment).

This spending on services normally accounts for over 50% of the overall consumer spending.

After declining nearly 10% in real terms in 2020, total consumer spending probably rose around 7% last year, based on results for the first three quarters.
Spending on services alone fell 7.3% in 2020, but last year they expanded by around 4.4%.

However, now that a new wave of COVID has overwhelmed Hong Kong, even tougher social distancing curbs are imminent.

This will probably cause consumer spending to slump further in the first quarter of 2022.

The Hong Kong Retail Management Association has called on the government to introduce a fresh round of HK$5,000 (US$640) electronic consumption vouchers to stimulate demand and shore up the economy.
Fortunately, judging from the experience of South Africa, the US and other places that were hit before Hong Kong by the new variant of COVID, infections are likely to peak fast and fall off sharply.
However, unlike these other countries, which never embraced the zero-COVID policy of China and Hong Kong, the new new strain has made the Hong Kong government look especially bad and is putting its experience compared with the Mainland’s in such a poor light that it could invite intervention by Beijing in Hong Kong in ways that further undermine the “one-country, two system” political model.

INDIA Comments The drop in GDP in April-June 2020, at 24.4%, was the largest in the country’s history.
This was a period when a stringent national lockdown was in place and individual income dropped by approximately 40%.
For the Februry 23, 2022 ASIAN INTELLIGENCE Page 5 Recovery in Retail Sales Is Stalling(real year-on-year percent change in retail sales)-60-50-40-30-20-10010203040JAN 2018MAR 2018MAY 2018JUL 2018SEP 2018NOV 2018JAN 2019MAR 2019MAY 2019JUL 2019SEP 2019NOV 2019JAN 2020MAR 2020MAY 2020JUL 2020SEP 2020NOV 2020JAN 2021MAR 2021MAY 2021JUL 2021SEP 2021NOV 2021PercentSource: HK Census and Statistics Department Political & Economic Risk Consultancy, Ltd. Issue #1,086 entire fiscal year, which ended in March 2021 and therefore largely coincides with the first year of COVID in the country, private consumption declined 6.0% in real terms.
The contraction hit some consumer- based industries much harder than others.

For example, hotels and restaurants suffered a 56.4% plunge in activity in the entire fiscal year, while air transport was down 65.3%.

On the other hand, people still needed to eat, so food products, beverages, and tobacco sectors still rose 3.7% in real terms.

They also needed to use communications services more, resulting in such activities rising 1.8%.
the economy coincided with the first quarter of the new fiscal year (April-June 2021), when the GDP expanded 20.1% year-on-year.

It then slowed to an increase of 8.4% in the July-September period.

Private consumption has probably slowed further since then considering that the country has been fighting another wave of COVID.

Hotel and travel business remains depressed, but there has been a recovery in retail trade in goods.
recovery of The A recent survey by the Retailers Association of India indicates that most categories of goods recovered in 2021 at least some of the ground that they lost in 2020.

The results do not cover the entire calendar year but they do compare sales in any given month with their year-earlier level.
The one category of products that consistently performed the best over the first two years of the pandemic was consumer durables & electronics, which enjoyed an increase in sales in both the 12/19 – 12/20 period and the 12/20 - 12/21 periods.
According to this survey, most other categories of goods experienced higher sales last year than in 2020, but by the end of 2021, retail sales of furniture & furnishings and beauty, wellness & personal care products were still below their levels registered at the end of 2019, i.e., before the pandemic.

One interesting result is that Indians with money seem to be growing more concerned about risks like inflation and have focused more on preserving their wealth.
This is reflected by the very small decline in spending on jewelry in the first year of COVID, while the 31% recovery of such spending in the 12/20 to 12/21 period put total retails sales of jewelry 9% above their pre-pandemic level.

Like elsewhere in Asia, Indian consumers have moved toward online business, forcing established retailers to expand their digital footprints.
Indeed, the movement has been in both directions, with large traditional retailers buying up e-commerce companies, and the more successful e-commerce companies investing more in traditional retailers.

The pandemic has also seen a major erosion of brand loyalty across everyday categories as new products and brands are being launched by retailers as private labels.
Priorities of consumers are shifting – away from brands to health considerations and channels of delivery in which speed, reliability, and low-cost (or free) are preferred.
INDONESIA Comments Page 6 ASIAN INTELLIGENCE February 23, 2022 Change in Retail Sales By Category-8-26-2118-29-25-19-12-5-4714171926283131-40-30-20-10010203040Furniture & furnishingsBeauty, wellness & personal careSports goodsConsumer durables & electronicsApparel & clothingQuick service restaurantsFootwearFood & groceryJewelryDec 2021/Dec 2020Dec 2020/Dec 2019Source: RAI Business Survey –Retailers Association of IndiaPercent Issue #1,086 Political & Economic Risk Consultancy, Ltd. Consumers are starting to spend more in Indonesia, which is a good thing considering that over half of the country’s GDP comes from private consumption.
Judging from national accounts figures, private consumption was the weakest in the second quarter of 2020, when it declined 5.52% y-on-y in real terms.

It continued to fall on an annual basis for the next three quarters, before turning positive again in the second quarter of 2021.
It suffered a setback in the third quarter when a new wave of COVID hit, but then accelerated in the fourth quarter and finished 3.55% higher than in the fourth quarter of the preceding year, although in real terms it was still 0.2% below its level in the fourth quarter of 2019.

The worst hit sectors were transport and restaurants, both of which declined at double-digit y-on-y rates throughout most of 2020.
Their annual change turned positive again in April-June of 2021, but the levels of business in both these sectors are still far below their pre-pandemic levels.

In contrast, households maintained their spending on health products and services throughout the pandemic period, and, while they economized, spending on food outside of restaurants also held up throughout the pandemic.

Consumers had more discretion when it came to purchaes of clothing, housing, and household goods.
Such spending declined in 2020, but it recovered most of this lost ground in2021.

Except for hotels and transport, the value of most other activities should exceed 2019 levels this year, as more Indonesians return to major cities from rural areas and resume lifestyles that are in line with those that existed before the pandemic.

As people return to their jobs and work more hours, average household incomes should also increase.
The recovery of private consumption in 2022 will be incomplete because the tourism sector still will be far down from previous peak levels, and this will prevent transport, hotels, and restaurant businesses from returning to pre-pandemic levels.

Still, overall consumer spending could grow by close to 5% in real terms, which would be in line with 2018 and 2019, when it expanded by 5.05% and 5.04%, respectively.
The shift by Indonesian consumers away from shopping in traditional stores to e-commerce and home- delivery systems is likely to continue at a rapid rate, but unlike most other countries in the region, the level of online business is still relatively small.

This is giving larger, more traditional retailers time to develop online channels of their own, while small retailers have been forced by the pandemic to survive by diversifying into such lines as home-delivery services.
JAPAN Comments With restrictions in big cities to control the spread of COVID-19 lifted and a substantial drop in daily cases, household spending is likely to pick up in the coming months as people start shopping and dining out again.

Household spending should also receive a boost from the government’s distribution of 100,000 yen (US$878) in cash and coupons to families, students, and temporary workers hit hardest by the pandemic.
Still, the recovery in private consumption in Japan will be underwhelming compared with other advanced economies, particularly the US.
Februry 23, 2022 ASIAN INTELLIGENCE Page 7 Indonesian Consumers Venturing Out Again(year-on-year % change in private expenditure, real terms)0.5-9.62.3-8.13.1-4.2-0.71.42.62.23.91.7-0.11.8-12-10-8-6-4-20246Food & Beverages, Other Than…Transportation & CommunicationHousehold Housing & EquipmentRestaurants & HotelsHealth & EducationClothing & Maintenance ServicesOthers20202021Source: Statistics IndonesiaPercent Political & Economic Risk Consultancy, Ltd. Issue #1,086 The upturn was already apparent in the final quarter of 2021 in both national accounts terms and according to retail sales statistics.
According to government estimates of GDP, consumer spending, which makes up more than half of the economy, increased 2.7% in October-to-December 2021 from the previous restaurants, (exclusively entertainment domestic travel) sectors benefited from what was then a low rate of COVID infections.

The rebound in the value of consumer spending brought it back above the level in the final three months of 2019, the last quarter unaffected by COVID restrictions.

However, that is really not much to cheer about.


Consumer spending in the fourth quarter of 2019 was down sharply on both a quarterly and annual basis due to the government’s hike in the consumption tax in October 2019 and to disruption caused by Typhoon Hagibis that same month.

quarter and as travel In fact, the trend of consumer spending in Japan has been disappointing for years.

In national accounts terms, private consumption has declined annually for eight of the past 14 years in real terms.
For all of 2021, real private consumption was 1.4% higher than in 2020, but in value terms it is still below pre-pandemic levels.

The value of retail sales in Japan was up 1.4% y-on-y in December.

For the fourth quarter of 2021, retail sales also rose 1.4% y-on-y and 2.0% on the previous quarter; for all of 2021, retail sales were up 1.9%.

Fuel sales jumped 25.9% in the fourth quarter from a year earlier, thanks to soaring gas prices, pushing up the overall retail trend.
However, car sales fell 13.3% due to supply bottlenecks and electronics sales declined 10.6% with diminishing demand for stay-at-home appliances.

Sales of food & beverages rose 2.6% in the October-December period from the like span of 2020, while clothing sales were up 1.0%.

MALAYSIA Comments Consumer spending in Malaysia is beginning to recover.
The real value of private consumption in the fourth quarter of last year was 3.4% above its level of the like span of 2020, but it was still 0.5% below its level of the fourth quarter of 2019.

Retail sales were at their weakest point in the second quarter of 2020, when they were running more than 21% below their level of the year before.

They remained weak for the next year, improving or deteriorating depending on whether COVID-19 was increasing or receding as a problem.
A real recovery that looks like it could be sustainable got under way in the fourth quarter of last year.

Consumer sentiment improved once the country got a new government, which quickly acted to pass a budget that included cash aid for those on low incomes and subsidies for basic food and fuel items.

As in most Asian countries, the business sectors in Malaysia that suffered the biggest falls in business during the pandemic were transport, restaurants, hotels, and recreational services.
Conditions are improving in all these sectors, but their level of business remains far below pre-pandemic levels, and it will probably be at Page 8 ASIAN INTELLIGENCE February 23, 2022 Private Consumption Back to Pre-COVID Levels(seasonally adjusted quarter-to-quarter real % change, annualized)-40-30-20-1001020302017 12017 22017 32017 42018 12018 22018 32018 42019 12019 22019 32019 42020 12020 22020 32020 42021 12021 22021 32021 4PercentSource: Japan’s Cabinet Office Issue #1,086 Political & Economic Risk Consultancy, Ltd. least another year of a hard slog for these industries.
Clothing and footwear did not suffer as sharp a fall as these harder hit industries, but they have been slower to recover than most.

In contrast, food sold outside of restaurants, and housing & utilities experienced only small declines during the worst period, and they have posted modest recoveries since then, while communications is the one category of expenditure that has increased throughout the pandemic period, reflecting households’ need to stay connected online.
Malaysia’s Ministry of Finance is probably too optimistic in forecasting that private consumption growth will accelerate to 7.3% this year from 1.9% in 2021, supported income and better by higher disposable employment prospects.

For political as much as economic reasons, the government will try to put more cash in the hand of average Malaysians, but lingering health concerns and continued depressed conditions in some major tourism will cause most industries their households spending.
In view of these headwinds, private consumption growth this year is more likely to be closer to 5%.

to remain cautious like in PHILIPPINES Comments Consumer spending, which normally accounts for around 73% of total GDP, fell more sharply in response to the COVID-19 pandemic than in any other Asian country.

Moreover, the slowness with which the population has been vaccinated and the relatively high rates of infections that have persisted throughout 2021 have held back the recovery in consumer spending.
It might be another two years before the real value of household consumption expenditures is back to its pre-pandemic level.

The government has been unable to give households as much financial help to weather the pandemic as have most other governments in the region.

Moreover, private household incomes has been squeezed further by lower remittances by Filipinos working abroad.

Consequently, household savings have declined more in the Philippines than elsewhere in Asia.
Since poverty was a problem to begin with, many households have struggled to keep up with necessary expenses and have had to draw down on savings or set aside less for savings.

This Februry 23, 2022 ASIAN INTELLIGENCE Page 9 Limited Recovery in Private Spending(year-on-year percent change in real terms)5.5-13.73.4-11.2-13.77.0-49.5-26.716.25.6-0.83.30.9-7.512.0-18.0-9.15.8-60-50-40-30-20-1001020Food & non-alcoholic beveragesClothing & footwearHousing & utilitiesFurnishings, house.

equip.
equip.

& maint.TransportCommunicationRecreation services & cultureRestaurants & hotelsOthers20202021Source: Department of Statistics, MalaysiaPercentWeaker Consumer Recovery than Elsewhere in Asia(year-on-year % change in private expenditure, real terms)5.0-25.6-16.45.8-12.9-2.2-33.56.1-44.1-11.7-43.11.43.4-8.011.93.22.914.40.19.03.78.65.14.5-50-40-30-20-1001020Food & non-alcoholic bev.Alcoholic bev., tobaccoClothing & footwearHousing & utilitiesFurnishings, house.

equip.
& maint.HealthTransportCommunicationRecreation & cultureEducationRestaurants & hotelsMiscellaneous goods & services2020/20192021/2020Source: Philippine Statistics AuthorityPercent Political & Economic Risk Consultancy, Ltd. Issue #1,086 means there is less pent-up demand in the Philippines than elsewhere, and when the pandemic finally does cease to be a major concern and people are freer to move around again (and feel comfortable doing so), there is unlikely to be a big rebound in consumer spending the way there has been or will be in many of the other countries covered here.
Indeed, it is possible that households could struggle further in 2022 as they face the double challenge of navigating an environment of higher prices and rising borrowing costs.

Online sales have outperformed sales at traditional stores during the pandemic, particularly large department stores.

However, the growth of retail e-commerce in the Philippines is constrained by factors that are less restrictive in most other countries in the region.
For one, the large number of islands complicates online deliveries.

More importantly, the majority of the population in the Philippines remains unbanked and, therefore, unable to make online transactions.

This is being mitigated by the emergence of payment facilitators that allow cash-on-delivery transactions, but it is shaping the type of e-commerce that is being done.
While big department stores are having to develop online and home delivery channels, it is the thousands of small shop-owners that are being forced by the pandemic to accept orders over the phone or internet and to deliver directly to purchasers.

According to the Department of Trade and Industry, the number of online sellers increased from 1,700 in March 2020 to 93,318 in January 2021.
It is largely for this reason that private estimates put the value of total retail e-commerce transactions in 2020 at 229.8 billion pesos (US$4.79 billion), or 11.8% more than in 2019, while the value increased a further 15.1% in 2021 to 264.5 billion pesos (US$5.19 billion).

The lower growth in US$ terms is a result of the weakening of the peso against the dollar during the year.
SINGAPORE Comments The retail sector was hit especially hard by the COVID pandemic in 2020 because that was when spending by tourists disappeared, adding to the dampening impact of restrictions on the spending of residents.

Throughout much of 2020, physical retail stores were closed except for those deemed essential such as supermarkets.

As a result, total retail and food & beverage sales contracted by 15.8% in real terms in 2020, with department store sales hit especially hard, having fallen 40%.
Retail statistics for 2021 are more a reflection of spending by domestic households alone since tourists remained largely absent from the market.

There was a modest recovery in local consumer spending last year as restrictions on stores were eased.

Total retail spending rose 10.7% in real terms and 11.1% in nominal terms.

However, people remained extremely health conscious and refrained from face-to-face contact.
Consequently, department store sales managed to rise by only 10.6%, not enough to come even close to making up for the loss in business the previous year.

Moreover, supermarkets & hypermarkets suffered a 2.3% fall in business in 2021, while mini-marts & convenience stores experienced a 6.7% decline in sales.

These declines highlight one of the biggest shifts in consumer spending habits in Singapore stimulated by the COVID pandemic.

This is the rise in online business and home delivery services.
By the end of 2021, Singaporeans were doing 15%-16% of their total business with supermarkets and hypermarkets online.

This compares with only 7%-8% just before the pandemic began.

Other types of retail spending also shifted online, raising the share of online retail sales to total retail sales to 15%-16% late in 2021 from only about 6% prior to the arrival of COVID in early 2020.

More online business also meant that households had to spend more on computers and other electronic products.
This was one category of retail spending that even increased in 2020, having risen 3.0%, but the industry really received a shot in the arm last year when it experienced an increase in total sales of 25.6%.

Not surprisingly, computers & telecommunications equipment comprised the biggest category of online sales.

Between 50% and 55% of all such equipment sold last year was done through online Page 10 ASIAN INTELLIGENCE February 23, 2022 Issue #1,086 Political & Economic Risk Consultancy, Ltd. purchases.
While many people are looking forward to going back to shopping in stores, many Singaporeans have indicated that they will continue to shop more online than they did before the lockdown.

Singapore residents also loosened their belts and spent more on wearing apparel & footwear (28.6%), furniture & household equipment (15.8%), and recreational goods (20.9% ) last year.

In most cases this made up for the declines in sales for these products suffered in 2020.
However, one major exception was watches & jewelry.

Although such sales jumped 41.4% last year, it did not make up entirely for the plummeting value of such sales in 2020.

However, that watches & jewelry recovered as much as it did could indicate that local consumer confidence is improving.

In 2020, local households were more unsure of their own financial situations and “traded down” by spending less on luxury brands.
However, as last year progressed and their savings increased, they became more comfortable with luxury and big-ticket purchases.

This was also reflected in the 10.8% rise in motor vehicle sales in 2021.

It did not make up for the 24.4% decline in such sales registered in 2020, but it was still a good growth.

trade and All the numbers cited so far were obtained primarily from the monthly surveys of retail food & beverage establishments.
They differ private from expenditures consumption used to calculate Singapore‘s GDP, which are shown in the graph here.

but they tell the same story.

The industries that have still not come close to recovering the ground lost in the first year of the pandemic include transport, recreation, food serving services, and hotels.

In contrast, perhaps to because spend more their homes, Singaporeans have spent more on housing, home furnishings and maintenance.
It is understandable that Singaporeans are spending more on their health, but it is interesting to note that they are also spending more on alcoholic beverages and tobacco.

In fact, this type of spending never fell during the pandemic.

Last year it was a record high in value terms.

they have had time in Consumer spending is likely to grow further in 2022 as spacing and other restrictions are progressively eased.
However, the food & beverage services sector and some tourist-reliant segments of the retail trade sector are not expected to return to pre-COVID levels by end-2022 due in part to the slow recovery in foreign visitor arrivals.

Looking further ahead, consumer spending growth could be dampened in 2023 and 2024 as a result of the government’s decision to raise the goods and services tax in two steps beginning next January.
It will also raise property taxes and registration fee rates for luxury cars, beginning in 2023.

These tax hikes will translate into higher prices, which could deter consumption.
Februry 23, 2022 ASIAN INTELLIGENCE Page 11 Food & on oho Beverages oho Beverages & To a o oth ng & Foot ear o s ng & esF rn sh ngs & o seho d a nt ea thTrans ort o n a on e rea on & t re d a onFood erv ng erv es o oda on erv es s oods & erv es Source: Sin apore epart ent of Sta s cs ercent Political & Economic Risk Consultancy, Ltd. Issue #1,086 SOUTH KOREA Comments According to Bank of Korea, the annual trend of South Korea’s household consumption expenditure (in GDP terms) turned from positive to negative in the first quarter of 2020, as soon as COVID hit.
The downtrend accelerated through that year, reaching a nadir of minus 6.8% in the fourth quarter.

However, expansionary macroeconomic policy bolstered consumer spending starting in early 2021.

Household consumption rose 1.4% in the first quarter of 2021 from the like span of 2020, then accelerated to between 3% and 4% in the second and third quarters.

In October, local retailers mounted major sales campaigns both online and in stores.
Households responded by raising the growth in their spending to 6.5% in real annual terms in the fourth quarter.

Korea is one of the few countries in Asia where total retail sales (a subset of total household spending) have grown on a calendar year basis since the pandemic began.

Koreans did stay away from physical stores, but they made up for this by shopping much more online.

The low point for the combined growth of physical and online retail sales was in 2019, when they rose 4.3%.
They then accelerated slightly in the first year of the pandemic and picked up more steam in 2021, physical growing establishments increased 7.5% last year, while online sales grew by 15.7%.

11.3%.

Sales by After slumping in 2020, department store sales jumped 24.1% in 2021, with growth seen across all categories but mostly centering on foreign designer brands (up 37.9%) and kids’ sportswear (up 31.9%).
Whereas consumers in most Asian countries economized by switching to less expensive brands, Koreans bucked this trend.

Sales of imported luxury products jumped amid the new coronavirus due to so-called revenge shopping, which refers to consumers seeking comfort by purchasing goods while social activities and travel are restricted.

Sales of cosmetics increased 15.3%, while those of electric and electronic goods were up 13.6%.
Convenience stores also saw their sales up 6.8% year-on-year, as more people purchased daily necessities near their homes, with attention focusing on food purchases.

In contrast, people stayed away from large discount chain stores and smaller supermarkets.

Their sales fell 2.3% and 9.1%, respectively, in 2021.

The government is currently in the middle of a three-phased strategy to remove all limits on gatherings and distancing.
The first phase, which began last November 1, dropped all operating-hour curbs on restaurants, cafes and other businesses, though nightclubs still had to close by midnight.

This relaxation was one reason why consumer spending rebounded as strongly as it did in the fourth quarter.

Visitors to high-risk venues such as indoor gyms, saunas and karaoke bars will have to be fully vaccinated, while private gatherings in Seoul and surrounding areas can include up to 10 people regardless of vaccination status.
What remains to be seen is whether the final two phases of the strategy will go as planned or if the government will have to stretch out their implementation due to the Omicron variant of the virus causing new problems.
The first phase lasted about a month and a half before it had to be paused on December 18 amid a Page 12 ASIAN INTELLIGENCE February 23, 2022 Retail Sales Growth in Korea8.56.26.84.35.511.3024681012201620172018201920202021PercentSource: Statistics Korea Issue #1,086 Political & Economic Risk Consultancy, Ltd. hospital bed crisis propelled by the worst surge in patients.

The closure time for businesses was pushed back to nine at night and several other restrictions were reimposed.
This setback notwithstanding, Koreans are likely to subjected to less social distancing and to have more freedom in 2022.

The proportion of the population vaccinated against the virus should continue to increase, and other medicines are likely to be developed that improve treatments for those who catch the virus.

The current unavailability of vaccines for children will be a bottleneck, but that too is likely to decline in significance as the year progresses and this age group gains access to vaccines too.
While the value of private consumption should increase further this year, its growth rate is likely to slow.

However, this is more because of the abnormally large rebound in the fourth quarter from the depressed level of 2020.

This will not be repeated this year.

Still, the growth rate of private consumption should be more in line with pre-COVID levels of around 3% p.a.
This does not mean conditions will be back to “normal.” For example, Koreans will still be spending far less on foreign travel than they were before the pandemic, and, while the growth of online shopping might slow, it is still likely to grow faster than sales at brick-and-mortar stores, raising its share of total retail spending.
Within the category of online spending, the share of purchases accounted for by services is likely to grow faster than the share accounted for by goods (except for electronic products, which will probably keep leading online sales).

Two factors that could influence spending patterns are, first, a likely further increase in local interest rates and, second, a possible acceleration in inflation.
This might prompt more Koreans to use some of their savings built up from two years of living with restrained spending to pay down some of their household debt.

However, if Koreans do not react this way, concerns are likely to grow about households’ ability to service their debt repayments.

Averting asset bubbles has been outgoing President Moon Jae-in’s top policy priority as more than two dozen measures failed to curb a home price surge across Korea.
Should higher inflation force the BOK to raise interest rates faster, rising debt servicing burdens and potential asset price corrections could put households under financial strain, threatening the consumption recovery.

TAIWAN Comments Taiwan’s retail sector recovered late in 2021, as consumers gained more confidence in both economic prospects and health risks to venture more out of their homes and into shops and restaurants.
After suffering annual declines of 16.4% and 25.9% in the second and third quarters of 2021, department stores saw a 6.4% y-on-y increase in business in the fourth quarter, while restaurants saw their sales turn from annual declines of 10.7% and 26.6% in the second and third quarters to an increase of 4.6% in the fourth quarter.
As in other Asian countries, Taiwan consumers stayed away from physical stores and restaurants the pandemic and, instead, shifted their purchasing throughout most of Februry 23, 2022 ASIAN INTELLIGENCE Page 13 Taiwanese Shift to Online Shopping(nominal annual change)-10-50510152025302017-Q1Q2Q3Q42018-Q1Q2Q3Q42019-Q1Q2Q3Q42020-Q1Q2Q3Q42021Q1Q2Q3Q4Total retail salesRetail sales in non-specialized storesOnline retail salesPercentSource: Department of Statistics, Ministry of Economic Affairs Political & Economic Risk Consultancy, Ltd. Issue #1,086 more to online business and home-delivery food services.
The difference can be seen clearly in the graph here.

However, as individuals ventured more outside in the fourth quarter, they also cut back on the online shopping.

Such spending still grew on an annual basis much faster than did the growth of shopping in more traditional stores, but the 16.1% annual rise in online sales in the October-December period was lower than the 24.0% and 19.5% jumps in the second and third quarters, respectively.
Total retail sales grew 3.3% in 2021, a recovery from the rise of only 0.2% in 2020.

Retail spending totaled NT$3,985.5 billion (US$143.8 billion).

Consumer confidence in Taiwan took a hit in May of last year, following a spike in COVID-19 infections and the introduction of some of the most stringent countermeasures since the pandemic began.

At this point, Taiwan’s consumer sentiment was the lowest in a decade.

However, consumers stormed back in October, and by December holiday sales were strong.
The outlook for this year is good.

The Taiwan Institute for Economic Research Institute is forecasting that total private consumption in 2022 (a measure that is much broader than just retail sales) will grow 5.03%, compared with only -0.45% last year and -2.53% in 2020.

One of the more interesting changes in shopping behavior during COVID is that Taiwan consumers have indicated that they are more inclined to purchase goods that are sourced locally than they were before the pandemic.
Moreover, they indicated they will continue to show this preference even after COVID ends.

This could indicate that consumers have become more health conscious.

While this would not normally send up a red flag, in Taiwan’s case this could have political repercussions considering that some of the government’s recent policy changes have involved opening the door more to imports of foodstuffs that are going against consumer preferences.
For example, the government will now allow imports of US pork, despite longstanding consumer fears in Taiwan about the presence of ractopamine, a common feed additive used by American pig farmers.

More recently, the government announced that it will lift a ban on some food imports from Japan imposed after the 2011 Fukushima nuclear disaster.

Late last year, the government held a referendum on the decision to lift the pork ban, and it passed by a slim majority.
However, most Taiwanese failed to vote at all on the issue, and it could still hurt the government going forward, especially since the opposition KMT can now claim that the decision to lift the ban of food from Fukushima is more evidence that the DPP is willing to risk the health of average Taiwanese.

THAILAND Comments Total household spending (in real terms) reach around 7.6 trillion baht in 2021 -- still 11.6% lower than the pre-pandemic figure of 8.6 trillion baht in 2019.
Economists are hopeful that there will be an uptick in spending in the consumer and retail sector in 2022, but the value of spending will probably not return to its pre- COVID level before 2023.

At this point it looks like local households will continue to suffer from pinched incomes, with a large part of the problem being the failure of foreign tourists to return to the country.

Foreign tourist spending generally accounts for 12% of Thailand's GDP.
Thailand is so dependent on tourism as an engine for growth that its collapse during the pandemic has hit the country even harder than most in Asia.

First of all, spending by tourists has disappeared, leaving hotels, restaurants, bars and other businesses high and dry.

Secondly, so many Thais are employed directly or indirectly by tourism that the industry’s slump has caused household incomes to fall, forcing families to limit their spending to bare essentials.
Consequently, after registering a growth rate of 3.2% in 2019, retail sales fell 10.2% in 2020, with the worst period being in April 2020, when retail sales were down 29.3% from the year before.

Page 14 ASIAN INTELLIGENCE February 23, 2022 Issue #1,086 Political & Economic Risk Consultancy, Ltd. of rate Although decline the decelerated for the rest of the year and finally turned positive in December 2020, the value of retail sales stayed far below pre-pandemic levels.
There was also a new setback in the middle of 2021, when the Delta variant of the virus caused a new wave that prompted the government to reimpose lockdown measures and curfews.

Sales in department stores and other physical establishments at the end of 2021 were still running nearly 10% below their level of end 2019, sales of nondurable goods like food were down 9%, and sales of durable goods were off 0.6%.
The one positive feature in the retail industry for the past two years has been the growth of online business.

Retail sales via mail order houses and the internet have grown nearly 200% since the pandemic began, but this is still a relatively small component of the overall local retail industry.

VIETNAM Comments In the two years of the pandemic there have been widespread job and wage cuts in Vietnam, leading to a sharp decrease in disposable incomes and shopping by people.
The impact was felt more in 2021 than in 2020.

This is because consumers in Vietnam did not experience a “full-scale” lockdown during the initial outbreak of the pandemic, unlike markets such as China, Malaysia, and Singapore where out-of-home movement was permitted only for essential purposes.

In contrast, when COVID did hit Vietnam hard in the middle of last year, it was forced to shut down harder in key locations like Ho Chi Minh City than other governments in Asia had to do.
Higher prices, especially for food, have caused families to tighten their budgets on non-essential items like clothes, shoes and eating out, and do without luxuries entirely.

Product categories such as leisure & holiday, dining out, and karaoke & nightclubs have experienced the greatest cutbacks since the pandemic began, not least because of the closure or restrictions imposed on these activities.
Because they are spending more time at home, consumers are shifting from out-of-home consumption to at-home consumption, with big increases in purchases for food prepared at home or delivered to homes by outside providers.

Other increases have been recorded for internet services, healthcare products, and household cleaning products.

Indications are that the low point in consumer confidence might have occurred in the third quarter of 2021, and the confidence was improving again in the fourth quarter.
According to a report by the General Statistics Office, total retail sales of consumer goods and services were estimated at 1,312.6 trillion VND in the fourth quarter of 2021, up 28.1% over the previous quarter but down 2.8% over the same period last year.

For all of last year, total retail sales of consumer goods and services were estimated at 4,789.5 trillion VND, down 3.8% compared to the previous year.
By economic activity, retail sales of food and foodstuff increased 10.6% last year over 2020, transport sales decreased by 1.6%; sales of cultural and educational products decreased by 5.9%; sales of household appliances, tools, and equipment fell 8%; sales of accommodation and catering services dropped 19.3%, and sales of garments decreased by 9.3%.
Februry 23, 2022 ASIAN INTELLIGENCE Page 15 Retail Sales Growth by Channel(3rdquarter 2021 compared with 3rdquarter 2020) -2.4%-1.5%38.4%75.2%-20%0%20%40%60%80%Department stores, supermarkets,and general StoresRetail sales of new goods inspecialized storesRetail sales via stalls and markets ofother goodsRetail sales via mail order houses orvia InternetSource: Bank of Thailand Political & Economic Risk Consultancy, Ltd. Issue #1,086 for As elsewhere in Asia, the pandemic has boosted Vietnamese consumers’ receptiveness towards e-commerce and online purchasing certain product especially channels, services.
like home delivery categories Consumers also showed a surprising willingness to shop online for their basic necessities and fresh products.

As mobility increases and fears of catching COVID decrease, old patterns could return, but the pandemic has also stimulated development of new online payment and logistical systems that have cut delivery costs to These consumers improvements have changed the competitive landscape in ways that could be permanent.
They could also widen the gap in consumer preferences between major cities and secondary cities/rural areas, since the quality of logistical infrastructure is often so much better in the bigger urban areas that online providers can be much more competitive than they can be in places where the last-mile-delivery obstacles are much more challenging.

low as zero.
low as zero.

to as EXCHANGE RATES Currency Chinese renminbi Hong Kong dollar 2/18/22 6.3256 7.8006 Indian rupee 74.68715 Indonesia rupiah Japanese yen Malaysian ringgit Philippine peso Singapore dollar South Korean won Taiwan dollar Thai baht Vietnamese dong 14,328 115.03 4.1860 51.4270 1.3459 1,195.75 27.86 32.130 22,830 Commercial middle rate expressed in terms of US$1.
Published by: Political & Economic Risk Consultancy, Ltd. 20th Floor, Central Tower 28 Queen’s Road, Central, Hong Kong Mailing address: G.P.O.

Box 1342, Hong Kong Tel: (852) 2541-4088 Fax: (852) 2815-5032 E-Mail: info@asiarisk.com Web site: http://www.asiarisk.com The material in this report may not be reproduced in whole or in part without permission in writing from the publisher.
While every effort has been made to collate, check and present without ambiguity all data contained herein, the variety of sources from which they have been assembled and differing methods of reporting render verification oftentimes impossible.

Thus, they are published without warranty.

Retail Sales of Goods and Services(trillion dongs)01,0002,0003,0004,0005,0006,000201720182019202020213,956.64,393.54,892.14,976.54,789.511.0%11.3%1.7%11.6%3.8%Source: General Statistics Office of Vietnam