THE Philippines is lagging in consumer spending recovery in Asia as weak productivity growth and slowing remittance inflows continue to hold back household consumption.
“Asia’s consumer is showing signs of recovery. But it remains uneven rather than broad-based, with increasing differentiation across the region,” ING Economics regional research head Deepali Bhargava said in a commentary on Tuesday.
She said that Asia’s private consumption was gradually recovering as inflation eases, oil prices decline and household purchasing power improves.
The rebound has become increasingly uneven, however, with countries such as Japan, Australia, Singapore and India benefiting from stronger structural drivers while several Southeast Asian economies, including the Philippines, are trailing.
Bhargava said the divergence reflected structural differences across the region, with income growth, household savings and wealth composition increasingly shaping consumer spending patterns rather than temporary cyclical factors.
“Households entered the post-Covid period with elevated savings, but the extent to which these buffers still exist is increasingly divergent,” she said.
“In parts of Asean, particularly lower-income economies such as the Philippines and Indonesia, precautionary savings remain thin,” Bhargava added, noting that this makes household spending more vulnerable to income shocks and inflation.
For the Philippines, the biggest challenge was said to lie in structural labor market constraints limiting productivity and income growth and preventing stronger gains in household consumption.
She cited World Bank data showing that between 2010 and 2025, three out of every four new jobs created in the country were in non-tradable sectors, which generally record lower productivity growth.
While the information technology and business process outsourcing industry continued to expand, manufacturing stagnated due to factors such as the appreciation of the real effective exchange rate, high energy costs, technological changes and a difficult regulatory environment.
As a result, the economy has shifted away from higher-productivity, export-oriented industries toward lower value-added sectors, constraining income growth and ultimately limiting the sustainability of household spending, the report said.
Bhargava also noted the continued dependence on overseas Filipino worker (OFW) remittances to support domestic consumption.
“Consumption in the Philippines is closely tied to overseas remittances, which are predominantly used for day‑to‑day household spending rather than savings or investment,” she said.
“This structural reliance makes local demand heavily dependent on external income flows rather than domestic credit conditions.”
Data from the Bangko Sentral ng Pilipinas (BSP) showed that remittance growth eased to around 2 percent year on year while inflows declined to an 11-month low of about $2.7 billion in April.
Developments in the Middle East, Bhargava said, warrant close monitoring because the region accounts for roughly 17 to 18 percent of total Philippine remittance inflows.
While headline data have yet to show a sharp decline in remittances from the region, she said growth had moderated since February and monthly inflows had become more volatile amid the conflict there.
“As such, the recent slowdown and rising volatility could exert a more persistent drag on inward remittances as conditions in the Middle East region take time to stabilize,” Bhargava said.
“Given the limited offset from alternative income sources, particularly for lower‑ and middle‑income households, any sustained weakening in remittance inflows is likely to weigh on private consumption with a lag,” she added.
“This reinforces downside risks to domestic demand.”
