DOMESTIC consumption will likely remain weak as households have become more cautious on spending amid uncertainties, an analyst said.
“Consumption is low, and we do think that consumption will remain tepid throughout 2026 and even throughout 2027,” HSBC Global economist Aris Dacanay told reporters on Tuesday.
“I think a lot of households have increased their saving rate to prepare for the uncertain times ahead,” he added.
Despite improving purchasing power, Filipino households were said to be increasingly choosing to save rather than spend, dampening domestic demand and keeping economic growth below potential.
Dacanay said that consumption growth was already below 5.0 percent in real terms and likely to remain tepid throughout 2026 and even into 2027.
He added that while wage growth had started to outpace inflation for the first time since the pandemic, the improvement in purchasing power has not translated into stronger consumption.
“The household saving rate of Filipinos is now much higher than pre-pandemic levels,” Dacanay said.
“We did increase our purchasing power, but a lot of our households use this opportunity not really to increase their spending to consume more, but to be able to recuperate for the savings that they have dipped [into] or for the purchasing power that they have lost over a span of five years.”
A major factor behind the cautiousness is uncertainty stemming from corruption investigations linked to public infrastructure projects, Dacanay said.
“I think a big factor about it is uncertainty over the growth rate of the Philippines,” he added.
Economic growth likely fell below 4.0 percent in the fourth quarter, Dacanay said, dragging overall 2025 growth to 4.7 percent — below the government’s 5.5- to 6.5-percent target.
Growth could improve to 5.2 percent and 5.6 percent next year, he added.
“We think the government will have a difficult time spending its budget for 2026” amid higher scrutiny that could affect infrastructure projects, Dacanay said.
Economic growth could fall by around 0.5 percentage point for every 10-percent decline in public infrastructure spending, he added.
The “challenge for 2026,” Dacanay said, would be “whether this drag on fiscal spending will translate to slower domestic private demand.”