More Filipinos adapting to ‘hustle culture’

Majority of Filipinos juggle multiple jobs to boost their income sources in what market research firm Kantar called an emergent “hustle culture” in the Philippine workforce.

“We’ve observed that this behavior has resulted [in] a ‘hustle culture’ among Filipinos, as they try to earn more but at the expense of time for chores, personal interests and other activities,” Laurice Obama, consumer and shopper insight director at Kantar Philippines, said in a statement.

Obama cited Kantar’s survey of 2,000 households from February to April showing that seven out of 10 Filipinos manage their family’s finances by moonlighting or starting a business on the side.

Apart from the majority of the surveyed households, 19 percent said they were “struggling to keep afloat” because of retrenchment or working less hours, which reduce their take-home pay.

Only around 8 percent said they were comfortable with their economic situation.

Household spending

According to recent data from the Philippine Statistics Authority (PSA), household spending dropped to 4.6 percent in the second quarter from 5.5 percent in the same period last year.

Filipino consumers, according to the study, usually buy soft drinks, coffee, water, milk, instant noodles, biscuits and crackers when they visit the grocery stores.

But those struggling with their finances remain “mindful” of their purchases, as they cut expenses by making their grocery list shorter to make ends meet.

“In their buying decision, [the study shows] that those who are managing are stretching their funds to get more value for their money,” Kantar said.

“This group does grocery shopping less often and are buying even less than what they intended to when they visit stores,” its study noted further.

These cash-strapped consumers not only trim their grocery expenses but also look for discounts.

According to PSA’s data, consumers spend less on clothing and footwear. The primary contributors to consumption are transportation, housing, water, electricity and gas, among other priorities.

Assets growing

Kantar’s survey showed that 52 percent of respondents believe this will be their status quo in the next 12 months, 7 percent expect things to get worse and 41 percent believe their situation will get better.

On the other hand, a recent study by Allianz Global said net financial assets per capita in the Philippines grew by 13.2 percent year-on-year to 1,940 euros (P121,000 based on current foreign exchange rates) in 2023, placing the country in the 49th spot out of 60 economies covered by its latest “Global Wealth Report.”

While that figure still kept the Philippines among the poorer countries in Asia, the growth of its financial assets increased by 13.2 percent, the fastest clip in six years and well ahead of China or India, Global Allianz said.

Allianz Global said the 16 percent jump in asset class securities was the “main driver” of growth.

Other financial assets like bank deposits grew “strongly” at 9.1 percent, while insurance and pensions rose 9.8 percent.

But Allianz said insurance and pensions remained “underweighted” in Filipino households’ portfolios with a share of 7 percent, way lower compared to the 57 percent share of bank deposits.

But while wealth rose, the growth in liabilities of Filipinos also continued at 12.9 percent. As a result, Allianz Global said the debt ratio climbed to 27.1 percent last year, which was “still at a rather low level.”

“2023 was marked by sharp monetary tightening. But economies proved resilient and markets even boomed,” the report said.

Overall, Allianz Global said financial assets of private households worldwide recorded strong growth of 7.6 percent last year, making up for the 3.5 percent losses in 2022. Total financial assets amounted to 239 trillion euros at the end of 2023.

By region, financial assets of Asian households increased by 7.5 percent in 2023 to 63.8 trillion euros, a quarter above the level in Europe. All asset classes contributed to this increase, with bank deposits being the main driver after rising by 9.3 percent.

Source: Inquirer

Consumption may further weaken if inflation not addressed

The Philippine government should focus on managing persistent inflation in the coming months to support household spending growth, analysts said.

University of Asia and the Pacific Senior Economist Cid L. Terosa said elevated inflation was the “culprit” for muted consumption seen in the second quarter.

“Consumption will start to pick up towards the last quarter of the year, but it might remain muted if inflationary pressures persist and potential risks manifest,” he said.

The Philippine economy grew by 6.3% in the second quarter as higher construction and investment growth helped offset slower consumption.

Household final consumption expenditure grew by 4.6% in the second quarter, slowing from 5.5% a year ago.

Headline inflation accelerated to 4.4% year on year in July, mainly driven by a spike in electricity rates and food costs. This was the fastest inflation print in nine months.

In the first seven months of the year, headline inflation averaged 3.7%, above the central bank’s 3.3% full-year forecast.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the slowdown in consumer spending could largely be attributed to high inflation.

Increased borrowing costs reduce the purchasing power of consumers, “forcing some of the poorest of the poor and some people from the middle class to save and prioritize basic necessities such as food, shelter, utilities, transport fares, among others,” he said.

The Bangko Sentral ng Pilipinas (BSP) has kept policy rates at a 17-year high of 6.5% since October 2023. From May 2022 to October 2023, the BSP hiked borrowing costs by a total of 450 basis points to tame inflation.

Diwa C. Guinigundo, GlobalSource Partners’ Philippines analyst and former central bank deputy governor, said well-anchored inflation expectations could help provide additional incentives for higher consumption.

In an e-mail, he cited the need to improve households’ access to credit by easing lending standards without compromising standards.

“[Household spending] can be encouraged by ensuring better access by households through a better, more efficient system of the banks in being able to know their customers,” he said.

Emy Ruth Gianan, who teaches economics at the Polytechnic University of the Philippines, said targeted subsidies for various sectors may be needed in the short term to address anemic household spending.

“Note that households are most likely tight on spending because they do not see prices going down any sooner,” she said. “If we give them a signal that they can spend even at a fraction of the cost, then maybe we could boost consumption.”

FOOD INFLATION

Filomeno S. Sta Ana III, coordinator at Action for Economic Reforms, called on the government to come up with a strategic plan to boost agricultural productivity and address rising prices of food, which constitute around 43% of total household expenditures.

“Government’s reduction of food import tariff, particularly rice tariff, provides some alleviation, but is a temporary solution,” he said.

President Ferdinand R. Marcos, Jr. in June signed an executive order which slashed tariffs on rice imports to 15% from 35% previously, until 2028.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the government should focus on addressing the challenges facing the agriculture sector.

“While the economy is on a solid footing, challenges such as the agriculture sector’s continued weakness and potential global economic headwinds require careful management,” he said in a Viber message. “This could indicate challenges in food production or rural economic activities.”

In the second quarter, agriculture and fisheries output contracted by 3.3%, worsening from the 1.2% decline a year earlier, reflecting the impact of El Niño.

Farm damage caused by El Niño reached P15.3 billion, according to the final estimate issued by the Department of Agriculture.

HEALTHCARE COSTS

Meanwhile, Mr. Sta Ana said inadequate social services, especially for healthcare, “make the situation all the more distressing for the population” amid high food prices.

He noted that out-of-pocket expenses for health are equivalent to 46% of total current health expenditures.

“A World Bank figure shows that a previous trend of decreasing out-of-pocket expenses as a percentage of current health expenditure has recently been reversed,” he said.

Aside from healthcare, education is also one of the most expensive items among household expenses.

“To the extent that more public money is made available to expand such public services, the way this is done in other jurisdictions, that would be most helpful to households,” Mr. Guinigundo said.

Ms. Gianan said concerns over the affordability of healthcare and the lack of access to it force households to plan well ahead for future expenses.

“Young people tend to spend more than their elderly counterparts, and spending smooths out throughout the life cycle as people save more for their retirement and other life needs,” she said in an e-mail.

“This is compounded by the fact that we have underdeveloped social services which compels people to really look out for themselves,” she added.

Source: Business World

Household budgets to remain under pressure in Q4

Household consumption in the Philippines will likely remain under pressure in the fourth quarter amid multi-year high borrowing costs and elevated inflation, Moody’s Analytics said.

Moody’s Analytics in a report said Philippine economic growth may average around 5.4% this year, which is below the government’s 6-7% target.

“The Philippine economy will have to weather domestic and global storms in the last quarter of the year. The aggressive run of monetary policy tightening in 2023 should be over, but rate cuts are off the table until the middle of next year,” it said.

“Until then, household budgets will remain under pressure.”

The Philippine economy expanded by a better-than-expected 5.9% in the third quarter, driven by a recovery in government spending. This was faster than the 4.3% gross domestic product (GDP) growth in the second quarter but slower than 7.7% a year earlier.

Year to date, GDP growth averaged 5.5%, still below the 6-7% full-year target.

Moody’s Analytics noted the third-quarter GDP data reflected deteriorating demand. Household consumption grew by 5% in the July-to-September period, slower than 8% a year prior and 5.5% in the previous quarter.    

“Private consumption, the economy’s main engine, has stalled on account of elevated inflation and high borrowing costs,” it said.

Headline inflation slowed to 4.9% in October from 6.1% in September and 7.7% in October 2022, marking its slowest pace in three months. However, inflation breached the 2-4% target for the 19th straight month in October.

For the 10-month period, inflation averaged 6.4%. This is still above the BSP’s 5.8% full-year forecast.

The Bangko Sentral ng Pilipinas (BSP) has raised interest rates by 450 basis points (bps) since May 2022 to fight inflation. The benchmark interest rate is currently at a 16-year high of 6.5%.

“Cost-of-living pressures have forced many to rein in spending. The retreat on a year-earlier basis in gross capital formation and imports of goods and services also underscored the broader weakness in domestic demand that has put a lid on business and consumer confidence,” Moody’s Analytics said.   

In the third quarter, gross capital formation declined by 1.6%, ending nine straight quarters of growth. This was a reversal of the 18.2% expansion a year ago and 0.3% in the second quarter.

Imports of goods and services also shrank by 1.3%, a reversal from the 18.5% growth in the third quarter of 2022 and 0.2% a quarter earlier.

Meanwhile, Nomura Global Markets Research in a separate report said they kept their Philippine GDP forecast at 5.2% for 2023, slower than 7.6% in 2022.

However, it sees growth picking up to 5.8% in 2024 and 6.1% in 2025, as better infrastructure spending will likely boost the economy’s growth momentum.   

“A resurgence in food and energy prices and a deeper global growth slowdown are downside risks to growth,” Nomura said.

The Japan-based research firm also maintained its full-year inflation forecasts at 6.2% for 2023 and 3.8% for 2024, despite the lower-than-expected inflation print in October.

“Base effects will start to become more favorable in the next few months but, similar to BSP’s assessment, we believe headline inflation is unlikely to return to BSP’s 2-4% target until August 2024,” Nomura said.

BSP Governor Eli M. Remolona, Jr. earlier said that even if inflation may go down to within the 2-4% target in the first quarter of 2024 due to base effects, inflation may likely go up again to above the target until July.

“Against this backdrop, we think BSP’s hiking cycle is likely over, despite maintaining its hawkish tone after delivering an off-cycle 25-bp hike to 6.5% in October,” Nomura said.

Nomura noted that the BSP may start cutting policy rates in September 2024.

The Monetary Board is widely expected to hold borrowing costs at 6.5% at its meeting on Thursday, according to 15 of 18 analysts in a BusinessWorld poll conducted last week.

Source: Business World