STABLE economic growth and wage increases will support consumer spending in the Philippines although growth could be constrained by economic and geopolitical uncertainties, a Fitch Group unit said.
“We hold a cautious but positive outlook for consumer spending in the Philippines over 2026,” BMI said in a report released on Friday.
“Consumer purchasing power will expand, supported by stable economic growth and a still-tight labor market facilitating real wage growth,” it added.
“Key risks to this outlook include elevated sticky inflation, lower remittances and high debt levels.”
Household spending growth is expected to moderate to 4.5 percent this year from 4.7 percent in 2025, hitting P14.1 trillion and up 26.29 percent from before the pandemic.
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 forecast, BMI said, is in line with expectations that the economy would grow by 5.2 percent this year, below the government’s 6.0- to 7.0-percent target but still an improvement from 2024’s slump to 4.4 percent.
Inflation was forecast to hit 3.1 percent this year, within the Bangko Sentral ng Pilipinas’ goal of 2.0-4.0 percent, while the peso is expected to fall to P58.5 against the dollar from P57.5 last year.
Remittances, meanwhile, could come under pressure from potential financial stress in key host countries such as the United States, but the weaker peso would still increase the amount sent home.
As for employment, the jobless rate is expected to improve to 4.2 percent this year amid labor market reforms and will likely gain further through 2030, BMI said. Higher agricultural unemployment, however, poses a risk along with a slowdown in government initiatives.
Purchasing power will be 18.2 percent higher compared to 2029 as wages rise due to a tight labor market and lower inflation.
“The improving outlook over the medium term means that consumers will expand spending, leading to a growth in consumer spending and providing tailwinds to the growth of the Philippine retail sector over 2026,” BMI said.
High household debt remains a risk, however, as this will limit future borrowing capacity and disposable incomes. While interest rates have fallen amid lower inflation, monetary tightening could again be in the picture if inflation rises.
“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.
Geopolitical issues ranging from the war in Ukraine to tensions in the South China Sea are also expected to weigh on sentiment, and BMI said that “consumers will likely continue their cautious approach to spending, shifting further away from durable goods toward essential services.”
“Therefore, consumers will seek out value-oriented options and will become increasingly selective in their purchasing decisions throughout 2026.”