Philippine purchasing power seen to grow but key risks linger

MANILA, Philippines — Consumer purchasing power in the Philippines is projected to rise, BMI Research said, underpinned by steady economic growth and a tight labor market that supports real wage gains.

The outlook, however, faces risks from persistently high inflation, declining remittances and elevated household debt levels.

In a note to clients, BMI, a unit of the Fitch Group, held a “a cautious but positive” view on consumption in the country, expecting a slowdown in real household spending growth to 4.5 percent this 2026 from 4.7 percent last year.

This, BMI said, may weigh on the country’s gross domestic product (GDP), which historically gets about 70 percent of its fuel from consumer spending. The firm said GDP may grow by 5.2 percent this year, though still within the downwardly-revised government target of 5 percent to 6 percent.

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“Spending will remain influenced by the elevated inflationary pressures as well as currently high debt levels, along with related debt servicing costs,’ BMI said.

“A tight labor market will support spending, as real wage growth returns to positive territory, which will support purchasing power over 2026,” it added.

The economy expanded by just 3 percent in the fourth quarter of 2025 — the slowest pace in more than 14 years outside the pandemic — and well below market consensus.

The weak outturn dragged the average 2025 growth to 4.4 percent, missing the government’s 5.5 percent to 6.5 percent target. Officials and analysts pointed to a mix of climate-related disruptions and the Marcos administration’s sweeping anti-corruption drive, which had curbed government spending and weighed on business and consumer confidence.

READ: Philippine GDP growth slumps to post-pandemic low of 3% in Q4 2025

‘Tailwinds’ to growth

BMI shared the same view. “The recent weakness in consumer sentiment is driven by concerns over governmental corruption, spiking inflation and natural disasters,” it noted.

Looking ahead, the Fitch unit said improving outlook over the medium term means that consumers would expand spending, leading to a growth in consumption and providing tailwinds to the growth of the Philippine retail sector over 2026.

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But the firm believes there are “wider economic challenges” that Filipino consumers will confront this year.

“In 2026, the consumer sector faces significant headwinds amid a highly uncertain macroeconomic landscape,” BMI said.

“Stubborn core and services inflation, escalating global trade barriers, potential labor market softening and widespread geopolitical uncertainty are shaping consumer behavior and market dynamics,” it added. /dda