• Indonesia’s retail sales fell for the eighth consecutive month in July by 12.3% compared to -17.1% in June. The re-imposition of partial lockdowns could derail the recovery of the economy and dampen retail sales
• Philippines’ export growth declined for the fifth consecutive month by 9.6% yoy in July from -12.5% in June, while imports also declined by 24.4% yoy in July from -23.1% in June
• Singapore’s retail sales in July contracted by 8.5% yoy from -27.7% in June

Bleak economic recovery in Indonesia may dampen retail sales going forward

Indonesia’s authority announced that Jakarta will reimpose movement restrictions and into partial lockdown from 14 September due to the recent rise in Covid-19 cases. We believe this will impact economic activity until the public health in within control. The recent rise in cases were detected in public places i.e. restaurants and public transport. As such, we expect the re-imposition of partial lockdowns could derail the recovery of the economy and possibly leading to the country’s GDP growth missing the government’s revised target range of -1.1% to +2% in 2020 (5.0% in 2019). According to Bank Indonesia’s retail sales survey, the country’s retail sales fell for the eighth consecutive month in July by 12.3% albeit at a slower pace compared to -17.1% in June, as all categories had registered slower declines in July with the exception of stationary and communication. The slower decline in food, beverage and tobacco of -1.9% yoy (-7.6% in June) mitigated some of the decline in retail sales. Slower decline in sales reflect improvement in economic activity, as most regions have eased or lifted their lockdown measures since 5th June 2020. In April and May, Jakarta imposed restrictions that were eased in June. With the recent reinstatement of movement restrictions in the capital, we believe any recovery in retail sales will be delayed until the lifting of the lockdown measures.

In Singapore, consumer sentiment and spending remained weak as retail sales in July contracted by 8.5% yoy, albeit smaller decline than -27.7% in June. As for retail sales excluding motor vehicles, it fell by 7.7% yoy in July from -24.0 in June. The slight improvement in sales reflects the impact of the relaxation of the circuit breaker measures in late June. Retail sales may be bolstered somewhat by pent-up demand. However, we believe weak labour market conditions may continue to dampen consumer demand amid lower purchasing power.

Meanwhile in the Philippines, export growth declined for the fifth consecutive month by 9.6% yoy in July from -12.5% in June, while imports also declined by 24.4% yoy in July from -23.1% in June. The country’s trade deficit widened to US$1.8bn in July compared to US$1.4bn in the previous month. The slower pace of contraction in exports during the month reflects a gradual improvement, as other countries have also been gradually reopening their economies and easing containment restrictions. In 2Q20, Philippines’ economy contracted by 16.5% (-0.2% in 1Q20), its deepest decline since 1981. So far, the government has launched a fiscal package worth PHP595.6bn accounting for about 3.1% of GDP and on August 20 and approved a stimulus package worth PHP165bn to further support the country’s economic recovery.

Source: Affin Hwang Research - 11 Sept 2020