BMI, a unit of Fitch Group, said Tuesday consumer spending in the Philippines would continue to grow despite the impact of elevated inflation.
It said in a report real household spending in the country would grow by 5.5 percent year-on-year in 2023, as consumer confidence showed recovery from an all-time low reported in the second quarter of 2020.
“While this is down from the 8.7 percent growth estimated for 2022, real spending growth will settle to an average 5.9 percent per year over the rest of the forecast period [2023-2027],” BMI said.
BMI said inflationary forces would remain elevated across 2023, but nominal income growth was expected to outpace inflation, which would ensure real income growth for consumers, giving greater propensity for spending.
“However, inflation is likely to remain elevated, and we expect the central bank to tighten monetary policy further in an attempt to maintain control,” BMI said.
BMI said consumer confidence in the Philippines was improving but remained low. Latest data as of the first quarter of 2023 showed that consumer confidence stood at -10.4, an improvement from the -14.6 score reported in the second quarter of 2022.
This recovery was fueled by an improving employment landscape and the continuous recovery of the economy post-pandemic. Consumer confidence for the next 12 months also improved to 22.7 from 21.7 previously.
“We will continue to watch the consumer confidence indicator and amend our forecasts when necessary,” BMI said.
BMI said its forecast for real consumer spending in the Philippines was in line with its country risk team’s forecast that the Philippines’ real GDP growth would decelerate from 7.6 percent in 2022 to 5.9 percent in 2023.
The slowdown in growth was in line with expectations, but the pace of deceleration was more modest than predicted, it said.
It said higher energy prices and tightening monetary policy would result in further deceleration during the period.
“Inflation is likely to remain elevated relative to the Bangko Sentral ng Pilipinas’ target range of 2 percent to 4 percent, and we expect the central bank to tighten monetary policy further to anchor inflation expectations,” it said.