Consumer spending to drive growth this year

Robust household consumption is seen to prop up the economy this year, Fitch Solutions’ unit BMI said, but warned that inflationary pressures and other risks could dampen this outlook.

“We hold a positive outlook for consumer spending in the Philippines in 2025. For 2025, we expect it to be driven mostly by strong economic growth and its feed-through into higher disposable income, as well as a stable labor market,” BMI said in a report.

BMI expects Philippine gross domestic product (GDP) to grow by 6.3% this year and 6.7% in 2026. These projections are within the government’s 6-8% target for both years.

The Philippine economy grew by 5.6% in 2024, missing the government’s 6-6.5% target. 

“A deteriorating external demand will likely be a drag on the Philippines’ GDP. However, the private final consumption expenditure will be positive,” BMI said.

Household spending is seen to accelerate to 5.3% this year, it said. Private consumption, which accounts for about three-fourths of the economy, grew by a lackluster 4.8% in 2024.

Consumer confidence has also shown “upward momentum,” amid the continued recovery from the pandemic, BMI said.

In the central bank’s latest consumer expectations survey, an improvement was seen in consumer confidence for the first quarter of this year and the next 12 months. This, amid a more upbeat outlook on higher income, additional sources of income and more available jobs.

“Easing inflationary pressures will provide relief to real household incomes and enable growth in spending,” BMI said.

“A tight labor market will support spending, as real wage growth returns to positive territory, which will support purchasing power over the year,” it added.

On the other hand, BMI noted that risks continue to weigh on private consumption, such as prolonged high inflation and weaker remittances.

“These risk factors will adversely affect household purchasing power, while geopolitical tensions have also emerged as a risk that is likely to impact inflation and interest rates.”

“Although inflationary pressures have largely eased in many markets, price levels remain high, and many households have not yet experienced real wage growth sufficient to restore purchasing power to their pre-2022-2024 inflationary shock levels.”

BMI expects inflation to average 3.3% this year, in line with the Bangko Sentral ng Pilipinas’ (BSP) own forecast. Headline inflation remained steady at 2.9% in January.

“If nominal income growth does not keep pace with inflation, the purchasing power of consumers will deteriorate, which would be a drag to their spending.”

“Prolonged inflation, particularly in relation to food, will mean that consumers will have to increasingly allocate more of their disposable income towards meeting necessities,” it added.

Meanwhile, the peso is seen to “depreciate slightly” this year and settle at P58 against the dollar.

“Despite the roughly 1.7% depreciation of the peso, this is still a relatively positive outcome compared with the depreciation of 11% seen in 2022 and the 2% seen in 2023.”

“The weaker rate in 2025 is due to the combination of a higher expected consumer price index in the Philippines as well as the US Fed’s hawkish tilt,” it added.

In 2024, the peso weakened by 4.28% to close at P57.845 versus the dollar from its end-2023 finish of P55.37. The local currency sank to the record-low P59-per-dollar level thrice last year.

“While persistent intervention by the BSP in the forex market will help to curb depreciatory pressures on the peso, earlier rate cuts by the BSP relative to the Fed will continue to weigh on the currency.”

“Nevertheless, the relatively stable rate will mean that the Philippines, which remains heavily reliant on imports to meet local demand, will see relative stability in import inflation,” BMI added.

Elevated household debt also poses a risk to consumer confidence, BMI said.

“It not only constrains future borrowing capacity but impacts current disposable income levels. This is particularly true as debt servicing costs rise in response to increases in interest rates.”

“In many markets, central banks rapidly hiked interest rates during the 2022-2023 high inflationary period, reaching levels to which most households have not been accustomed over the past decade,” it said.

From mid-2022 to late 2023, the BSP was the most aggressive central bank in the region as it hiked key rates by 450 basis points (bps) to tame inflation.

The BSP began its easing cycle in August last year, lowering borrowing costs by a total of 75 bps by end-2024. 

“While interest rates will not reach the previous historical lows of the last decade, easing monetary policy will alleviate some debt servicing cost pressures,” BMI said.

Source: Business World

Recovery in consumption seen to fuel PHL growth

A recovery in household consumption could drive Philippine gross domestic product (GDP) growth to the 6% range this year, HSBC Global Research said.

“We think household consumption in the Philippines should return, bit by bit, to its regular levels, bringing overall gross domestic product growth back to the range of 6% or more,” HSBC economist for ASEAN Aris D. Dacanay said in a report.

The Philippines’ GDP expanded by 5.2% in the third quarter, its weakest growth in five quarters. This brought the nine-month growth average to 5.8%.

The government is targeting 6-6.5% growth for 2024 and 6-8% for 2025 to 2026.

“Consumption should also be boosted over the near term with the recent depreciation in the Philippine peso against the US dollar boosting the purchasing power of every US dollar remitted.”

HSBC also cited a stronger recovery in non-durable consumer goods.

“Non-durable spending may be improving fast, but spending on big-ticket items, such as cars and real estate, will need more time to return to normal.”

“These goods are large expenditures by nature, potentially requiring households to acquire credit. To optimize one’s borrowing costs, households may be waiting for the central bank’s easing cycle to end before eventually deciding whether to borrow money or not.”

Mr. Dacanay said household consumption is unlikely to be affected by the Trump administration’s aggressive tariff policy.

“Remittances, demographics, and services exports — three sectors of the economy that drive consumption — are subject to minimal tariff risks, at best. So, to monitor the Philippine economy in 2025, watching household consumption will be key,” he said.

“The economy does have some layer of insulation; household consumption remains the country’s main growth driver, and no other economy can put a tariff on consumption.”

Markets are pricing in the impact of US President Donald J. Trump’s aggressive tariff proposals. He has pledged to impose tariffs of up to 60% on China, 25% on Canada and Mexico as well as a 10% universal tariff.

Mr. Trump also said he planned to slap tariffs on imported computer chips, pharmaceuticals and steel as part of efforts to encourage manufacturers to make these products in the US.

“With all the headlines on trade and tariffs, there is a sense of relief that the Philippines is the least affected in ASEAN (Association of Southeast Asian Nations),” Mr. Dacanay added.

HSBC noted that household consumption has slowed amid elevated inflation and interest rates, which dampened purchasing power.

Private consumption grew by 5.2% in the third quarter of 2024, improving from 4.7% in the second quarter.

“But all this is already behind us. Inflation is back to within the central bank’s 2-4% target band, while monetary policy is amidst its gradual easing cycle,” Mr. Dacanay said.

Headline inflation averaged 3.2% in 2024. The BSP also expects inflation to remain within the 2-4% target band from this year to the next, as its baseline projections are at 3.3% and 3.5% for 2025 and 2026, respectively.

The central bank began its rate-cutting cycle in August last year, delivering a total of 75 basis points (bps) worth of cuts as of end-2024. This brought the key rate to 5.75%.

The BSP has signaled further rate cuts this year.

HSBC expects the central bank to bring down the benchmark rate to 5% by the third quarter of 2025.

Source: Business World

Ode to ukay: Filipinos were the top buyers and sellers of pre-loved goods online

In the case of our beloved flea market tradition, digital technology doesn’t disrupt but enhance it

From communication and finance to information dissemination, digital technology has disrupted how things were done in the last decade. In the wake of progress, people have also noted how certain traditions, jobs, and even lifestyle habits were rendered obsolete.

As we approach the middle of the 2020s, however, one lifeway beloved by many Filipinos has been further enhanced by the democratization of mobile internet and smartphones: Your neighborhood ukay-ukay.

Data released by one of Southeast Asia’s big reselling platforms shows that Filipinos are some of the largest users in the region, including Hong Kong and Taiwan, in terms of both buyers and sellers, with sellers making an average of P39,000.00 in 2024.

Filipinos led in Southeast Asia when it came to women’s fashion—a testament to our ukay culture. The same platform likened this to 2,544 tons of carbon dioxide offset. The data was gathered from January 1 to October 31, 2024.

Top search words from the Philippines included “bag” and “dress” and fast fashion brands Uniqlo and Zara while also reflecting aspirational purchasing through searches for Coach and Kate Spade. Interestingly, said online platform also allows users to donate items, and clothes were the top item given freely by its Filipino user base.

Meanwhile, in terms of technology, while iPhones from the last five years remained the most popular search, there was an interesting spike in Gen Z users searching for digicams.

Top search words from the Philippines included “bag” and “dress” and fast fashion brands Uniqlo and Zara while also reflecting aspirational purchasing through searches for Coach and Kate Spade

Is this a sign that we’re umay na with being online 24/7 and the constant scrutiny of it all? All while still wanting to document what’s dear to us? Similar to the Western Zillennials opting for ‘dumb phones’?

These developments were touted by the same company as good for users’ pockets (savings for the buyers, earnings for the sellers), and the planet, clarifying that they used “years watching Netflix straight” as a barometer for carbon dioxide emissions.

Over the decades, scientists have warned that rising carbon dioxide emissions from industrial activity would trap heat in the atmosphere, causing storms to strengthen, as ecosystems from polar ice caps to forests suffer from temperature imbalances, ultimately affecting the earth’s carrying capacity to sustain life.

A 2022 United Nations report indicts fashion for contributing to 10 percent of global carbon emissions. The same report also highlights fashion’s negative impacts in terms of water consumption and micro plastic fibers, ranging from 200,000 to 500,000 tons, released into the oceans via wastewater.

While secondhand buying is not the solution to an environmental crisis exacerbated by consumerism and consumption—fast fashion and retail gadgets included—the fact that Filipinos prefer pre-loved is still one step in reducing waste and, in the long run, reducing demand for producing more new goods.

There was a time when people bought technology and clothes to last for years, and the fact that we now want to give these things a second life, whether out of nostalgia or economic limits, is in a way countercultural in a world where FOMO-based marketing has pushed the bottomline at the expense of people and the planet.

Just take it from Miss Earth candidate and environmental activist Jessica Lane, who, through repeating a dress in three big public occasions (le gasp!), has shown, by example, that her advocacy doesn’t end at coronation night and that the action still continues when the lights and cameras go out.

Source: Inquirer