FILIPINO households are expected to become more selective in their spending this year as rising inflation pressures continue to erode purchasing power and weigh on consumer confidence, a Fitch Group unit said.
In its latest Philippines consumer outlook, BMI Country Risk & Industry Research said consumer spending growth is projected to slow down slightly to 4.4 percent in 2026 from 4.6 percent in 2025 as households prioritize essential goods and services over discretionary purchases amid higher living costs.
“Persistent inflation, while moderating from previous peaks, continues to erode purchasing power in many markets,” BMI said, adding that consumers are increasingly adopting “defensive spending strategies” by postponing non-essential purchases.
Consumer price growth accelerated to 7.2 percent last month due to rising fuel and energy costs.
BMI expects inflation to average 4.3 percent in 2026, exceeding the Bangko Sentral ng Pilipinas’ target range of 2 to 4.0 percent.
“Consumers will likely continue their cautious approach to spending, shifting further away from durable goods towards essential services,” BMI said. “As a result, consumers will seek out value-oriented options and become increasingly selective in their purchasing decisions throughout 2026.”
The research firm said elevated fuel prices linked to geopolitical tensions in the Middle East could further strain household budgets. BMI warned that a prolonged conflict in the Middle East could keep oil prices elevated for a longer period, raising the domestic fuel prices.
“This then erodes household purchasing power, weighing on domestic consumption,” BMI said.
Consumer confidence also remains weak despite some improvement from pandemic-era lows. BMI said Philippine consumer confidence stood at negative 15.8 in the first quarter of 2026, improving from negative 22.2 in the fourth quarter of 2025 but still reflecting concerns over household finances, inflation, corruption and natural disasters.
It added that external risks, including trade tensions, geopolitical conflicts and slowing global growth, could continue affecting consumer sentiment and spending behavior.
BMI said rising global trade barriers, particularly tariff hikes involving the United States, China and Europe, may disrupt supply chains and increase import costs, potentially feeding into higher consumer prices.
“We hold a cautiously optimistic outlook for consumer spending in the Philippines over 2026,” it said.
“While a stable labor market will facilitate real wage growth, inflation has risen to a three-year high and elevated oil prices from the Middle East conflict can erode household purchasing power, weighing on domestic consumption,” it added.
High household debt and elevated borrowing costs could also constrain consumer activity, BMI said, stressing that the Bangko Sentral ng Pilipinas (BSP) could end 2026 with the policy rate at 4.75 percent, keeping debt servicing costs relatively high for consumers already dealing with rising prices.
“While many markets will see a return to terminal rates over 2026, there is a risk that this will only be delayed and will therefore keep debt servicing higher for longer than expected,” it said.
“Should inflationary pressures accelerate, this could cause central banks to revert to a hawkish approach and return to rate hikes, thereby reigniting the burden of debt servicing costs,” it added.
