By BusinessWorld
Household spending growth in the Philippines is expected to slow this year as elevated inflation, weak consumer confidence, and higher oil prices due to the Middle East conflict weigh on purchasing power, Fitch Solutions unit BMI said.
In a report on Monday, BMI trimmed its projection for household spending growth in the Philippines to 4.4% this year from its 4.5% estimate in February.
The latest forecast also points to slightly weaker consumption growth compared with the 4.6% recorded in 2025.
“We hold a cautiously optimistic outlook for consumer spending in the Philippines over 2026,” BMI 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.
In the first quarter, household final consumption expenditure grew by 3%, slowing from 5.3% in the same period last year and 3.8% in the fourth quarter of 2025.
Excluding the pandemic years, this marked the slowest pace of household spending growth since the 2.6% recorded in the third quarter of 2010.
Meanwhile, rising food and utility costs amid elevated oil prices pushed headline inflation to a more than three-year high of 7.2% in March from 4.1% in February and 1.4% a year earlier.
BMI said consumer sentiment could also weaken further as high inflation and adverse weather conditions compound concerns stemming from last year’s corruption scandal.
This came even as consumers turned less pessimistic in the first quarter, with the confidence index improving to -15.8% from -22.2% in the fourth quarter of 2025, based on the latest Bangko Sentral ng Pilipinas (BSP) survey.
“Nevertheless, consumer confidence weakness continues to be driven by concerns over weakening household financial situations, governmental corruption, spiking inflation and natural disasters,” the Fitch unit said.
On the other hand, BMI said private sector spending may expand at a faster pace of 4.7% this year.
Meanwhile, Nomura Global Markets Research cut its Philippine economic growth forecast for 2026 to 4.6% from 5% after the economy posted weaker-than-expected first-quarter growth.
“The weak outturn in Q1 and the continued impact of the war in Iran prompted the downward revision to our 2026 GDP (gross domestic product) growth forecast,” Nomura analysts Euben Paracuelles and Nabila Amani said in a May 8 report.
Philippine GDP growth slowed to 2.8% in the first quarter from 3% in the previous quarter and 5.4% a year earlier, marking the weakest expansion since the first quarter of 2021.
The latest GDP print also fell short of market expectations, with a BusinessWorld poll of 21 economists yielding a median estimate of 3.4%.
Mr. Paracuelles and Ms. Amani said economic growth would likely remain subdued in the first half of the year due to weak sentiment and delayed government projects, with the Middle East conflict posing additional risks.
“We expect GDP growth to remain weak through H1 2026, as limited pre-procurement activity delays projects and as private investment spending continues to be hurt by weak sentiment,” they said.
“The impact of the Iran conflict on energy prices is only adding to these headwinds and causing a surge in inflation, weakening household purchasing power.”
However, the Nomura analysts said the government’s planned catch-up spending and favorable base effects could help support economic recovery in the second half of the year.
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