Philippine E-Journals

FORECASTING THE IMPACT OF COVID-19 ON THE HOUSEHOLD FINAL CONSUMPTION EXPENDITURE (HFCE) IN THE PHILIPPINES

Andre Perry P Dasmariñas | Gweneth H De Castro | Bea Jane M Lazona | Laurence P Usona

Discipline: Statistics

 

Abstract:

The Household Final Consumption Expenditure (HFCE) is a significant component of the Philippine economy. The term "HFCE" refers to families' spending on necessities such as food and drink, clothing, shelter, and health care. The gathered data from this study covers the country’s quarterly HFCE from 2001-2021. The study used various forecasting methods, including Triple Exponential Smoothing, Seasonal Autoregressive Integrated Moving Average (SARIMA), and TBATS in modeling time series data to depict the effects of COVID-19 on the country’s HFCE Growth Rate. The best model to predict the quarterly HFCE growth rate from 2022 to 2026 was identified using error metrics, particularly RMSE, MSE, and MAE. The SARIMA model had the lowest combined error of the train and test set, marking it as the best model for predicting the HFCE growth rate. Moreover, the HFCE growth rate was also predicted using various machine learning regression algorithms (SVR, XGBoost, and kNN), with a variety of economic indicators as the independent variables, including the inflation rate, unemployment rate, import of goods growth rate, import of services growth rate, export of goods growth rate, and export of services growth rates. The results of error metrics showed that SVR was the best regression algorithm for predicting the Philippines’ quarterly HFCE Growth Rate. The findings of this study indicate that as COVID-19 spread over the country, the HFCE growth rate dramatically decreased. Therefore, models used to predict the HFCE growth rate over the next five years are significantly impacted using historical data, including the years when COVID-19 occurred.