‘Consumer spending may slow this year’

MANILA, Philippines — Philippine consumer spending is expected to grow by 4.4 percent this year, slower than initially anticipated, as prices are likely to continue rising, according to research and analysis firm BMI.

“We hold a cautious but positive outlook for consumer spending in the Philippines, with a slowdown in real household spending growth – from 4.6 percent in 2025 to 4.4 percent year-on-year in 2026,” the Fitch Solutions unit said in a report.

The latest outlook is also slightly lower than BMI’s initial forecast of 4.5 percent growth for consumer spending this year.

In real terms, BMI expects household spending to reach P14.1 trillion this year.

While BMI expects the higher demand for workers and low labor supply to support consumption and the faster increase in real wages to boost purchasing power this year, it said elevated inflationary pressures, high debt levels and related debt servicing costs are likely to negatively affect spending.

“With oil prices staying elevated for longer under our Country Risk team’s prolonged US-Iran conflict extend-to-end scenario, this will further raise the Philippines’ import bill and higher domestic pump prices. This then erodes household purchasing power, weighing on domestic consumption,” BMI said.

It also said consumer confidence remains sluggish amid concerns over weakening household financial situations, corruption issues, spiking inflation and natural disasters.

BMI’s consumer spending outlook is in line with its economic growth forecast for the Philippines of 4.7 percent this year.

While the economic growth forecast is below the government’s five to six percent growth target, it is higher than the 4.4 percent growth in 2025.

Philippine economic growth in the first quarter slowed to 2.8 percent, its weakest level in five years as flood control corruption issues and higher prices linked to the Middle East conflict weighed on investor and consumer sentiment.

BMI said in the same report that it expects inflation to rise to 4.3 percent this year from 1.7 percent last year.

The inflation forecast is also above the Bangko Sentral ng Pilipinas (BSP)’s two to four percent target range for this year.

Faster increases in food and transport costs pushed up inflation to 7.2 percent in April, its highest level in over three years. This brought average inflation from January to April to 3.9 percent.

With inflation expected to remain elevated, BMI said prolonged increases in food costs would lead to consumers spending more for their basic needs.

In terms of remittances, which are an important source of income for many Filipino households, BMI said there are risks related to potential financial stress in several global markets, especially the US, which accounts for around 40 percent of total remittances.

“However, the weakening of the peso would increase the amount sent back by overseas workers in local currency terms,” BMI said.

Overseas Filipino workers’ remittances hit an all-time high of $35.6 billion last year, up by 3.3 percent from $34.5 billion in 2024.

Turning to the labor market, BMI expects the unemployment rate to average 4.2 percent this year and remain steady from last year’s.

BMI said this would be driven by multiple government initiatives such as the Enterprise Productivity Act, the Apprenticeship Bill and the Lifelong Learning Bill, which are all aimed at improving the employability of Filipino workers and overall business climate to attract more investments.

“These drivers will likely remain in place over the medium-to-long term and we expect further improvements in unemployment rates through the 2026 to 2030 period,” BMI said.

However, BMI flagged the recent increase in unemployment in agriculture due to reduced activity and slowdown in government measures as risks.

A high level of household debt also remains a risk to BMI’s consumer outlook citing the constraints to future borrowing capacity and effects on current disposable income.

Debt servicing costs rise in response to increases in interest rates.

“By the end of 2026, we expect that the central bank’s key rate will rise to 4.75 percent,” BMI said.

At its April 23 policy meeting, the BSP ended its easing cycle as it raised the benchmark interest rate by 25 basis points to 4.50 percent.

BMI also flagged global risks that may affect Philippine households’ spending including the escalation of the United States-Iran conflict and the return of global trade wars, noting these may push up prices.

“As businesses navigate these challenges, consumers will likely continue their cautious approach to spending, shifting further away from durable goods toward essential services,” BMI said

“As a result, consumers will seek out value-oriented options and become increasingly selective in their purchasing decisions throughout 2026,” BMI added.