Philippines: Private consumption seen growing by 5% this year

• Feb 19, 2018

MANILA, Philippines — BMI Research said private consumption in the Philippines would continue to be strong due to the sustained economic expansion as well as improving purchasing power of consumers.

The research arm of Fitch Group said real private consumption is set to expand by five percent this year, slower than the 5.5 percent last year due largely to higher base effects after a strong growth of six percent between 2016 and 2017.

“The consumer outlook in the Philippines remains bright on the back of a strong economic performance and rapidly rising incomes, influenced by a tight labor market and sustained remittance inflows,” it said.

BMI added the projected inflation uptick this year would not have a pronounced effect on consumption.

According to the research firm, consumption will continue to perform strongly over 2018, driven by an ongoing boom in the services sector and one of the fastest growing economies in SouthEast Asia.

BMI Research expects the country’s gross domestic product (GDP) expansion to ease further to 6.3 percent this year from 6.7 percent in 2017 and 6.9 percent in 2016

“The slowdown in growth comes on the back of slowing reform momentum, although we highlight that the Philippines will still see robust economic growth of six percent plus due to the ongoing public infrastructure investment drive, and deepening economic cooperation with China and Japan,” it said.

Remittances from overseas Filipinos act as a vital source of secondary income for Filipinos and will continue to buttress levels of household spending over 2018.

With over 2.5 million Filipinos living and working in the US, Philippine households will continue to receive a large share of remittances in US dollars and therefore depend on the strength of the greenback.

“Philippine households receiving remittances denominated in US dollar will see purchasing power fall as the US dollar depreciates, acting as a drag on essential spending categories such as food and clothing,” it said.

BMI Research said improving labor market supports its favorable outlook for the Philippine consumer as latest data from the Philippine Statistics Authority showed a five percent decline in unemployment rate declined in October.

“We forecast unemployment to come in at seven percent in 2018, remaining stable from 2017,” it added.

Source: https://beta.philstar.com/business/2018/02/19/1789068/private-consumption-seen-growing-5-year#0WFeJ54dPviWq4XE.99