Robust households conassumption Is seen as the economy this year, the BMI said Fitch Solutions, but warned that the inflationary pressure and other risks can dampen these prospects.
“We have a positive view of consumer spending in the Philippines in 2025. Before 2025 we expect it to be driven by strong economic growth and its diet in a higher disposable income, as well as a stable labor market,” said BMI, “BMI said , “said BMI in a report.
BMI expects that the Filipino gross domestic product (GDP) will grow by 6.3% this year and 6.7% in 2026. These projections fall within the 6-8% target of the government for both years.
The Filipino economy grew by 5.6% in 2024 and missed the goal of 6-6.5% of the government.
“A deteriorating external question will probably be a resistance to the GDP of the Philippines. However, the private definitive consumption spending will be positive, “said BMI.
This year’s expenditure for households will accelerate to 5.3%, said it. Private consumption, which is good for about three -quarters of the economy, grew by a matte 4.8%in 2024.
Consumer confidence has also demonstrated ‘Out Momentum’, in the midst of the continuous recovery of the pandemic, BMI said.
In the last survey of the Central Bank, an improvement was seen in consumer confidence for the first quarter of this year and the coming 12 months. This, in the midst of a more cheerful view of higher income, extra sources of income and more available jobs.
“Enlightening the inflatoid pressure will offer relief to real household incomes and possible expenditure growth,” said BMI.
“A tight labor market will support the expenditure, since real wage growth returns to positive territory, which will support purchasing power during the year,” it added.
On the other hand, BMI noted that risks continue to weigh on private consumption, such as long -term high inflation and weaker transfers.
“These risk factors will have a negative influence on the purchasing power of households, while geopolitical tensions have also emerged as a risk that will probably affect inflation and interest rates.”
“Although the inflatory pressure in many markets is largely relaxed, the price levels remain high and many households have not yet experienced real wage growth to restore purchasing power to their inflato shock levels from before 2012-2024.”
BMI expects inflation to have an average of 3.3% this year, in accordance with Bangko Sentral NG Pilipinas (BSP )’s own prediction. The inflation of the head remained stable 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 resistance to their expenses.”
“Long -term inflation, in particular with regard to food, will mean that consumers must increasingly assign more of their disposable income to complying with the necessities,” it added.
In the meantime, the Peso is being seen this year as “somewhat” and is setting up against the dollar on P58.
“Despite the approximately 1.7% depreciation of the PESO, this is still a relatively positive outcome compared to the depreciation of 11% seen in 2022 and the 2% seen in 2023.”
“The weaker percentage in 2025 is due to the combination of a higher expected consumer price index in the Philippines and the ragged tilt of the American Fed,” it added.
In 2024 the Peso weakened by 4.28% to close to P57.845 versus the dollar from the end-2023 finish of P55.37. The local currency dropped to the Record-Lage P59-per-Dollar level three times last year.
“Although persistent intervention by the BSP on the Forex market will help to curb the printing pressure on the PESO, earlier tariff reductions by the BSP compared to the FED will continue to weigh on the currency.”
“Nevertheless, the relatively stable rate will mean that the Philippines, which remain highly dependent on the input to meet the local demand, will see relative stability in import inflation,” BMI added.
Increased household debt is also a risk for consumer confidence, BMI said.
“It not only limits the future loan capacity, but also influences the current disposable income levels. This is particularly the case, because the costs for debt service increase in response to the increases in interest rates. ”
“In many markets, central banks quickly increased the interest rates during the high inflato period 2022-2023 and reached levels at which most households are not used to the past decade,” said it.
From mid -2022 to the end of 2023, the BSP was the most aggressive central bank in the region because it increased the most important rates with 450 basic points (BPS) to tame inflation.
The BSP started its relaxation cycle in August last year, which reduced the loan costs with a total of 75 BPS by the end of 2024.
“Although the interest rates will not reach the previous historic lows of the last decade, the alleviation of monetary policy will alleviate some costs for debt services,” said BMI. – Luisa Maria Jacinta C. Jocson