Why the psychology of ‘utang’ matters for the economy

Debt or “utang” is not just a financial tool anymore. It is the lifeline that keeps many Filipino families afloat. With consumer spending making up about 70 percent of the economy, every peso that is spent keeps the economy moving.

When households keep buying, businesses do well but when they cut back, growth slows down. The tougher reality is that a lot of this spending is sustained by utang, drawn from savings, credit cards or loans simply to keep everyday life moving.

Behavioral finance explains that this behavior is rooted in a concept called present bias, which is the tendency to put more weight on immediate rewards than on future costs.

In the late 1990s, psychologists David Laibson of Harvard University and Ted O’Donoghue of Cornell University published an influential study that revealed how people often choose short-term satisfaction, such as spending or borrowing today, even when it leads to bigger problems later.

This bias explains why households continue to spend, even when incomes fall short, interest rates rise or debt levels grow. The pleasure of maintaining a lifestyle today feels more tangible than the burden of repaying loans tomorrow.

Extension of income

Combined with easy access to credit cards, installment plans and digital lending apps, present bias makes utang feel less like a burden and more like a convenient extension of income.

Recent data on the marginal propensity to consume (MPC) highlight this behavior. Before the pandemic, Filipino households typically spent 58.6 percent of their income in the first quarter, then pulled back midyear, before a sharp surge to nearly 70 percent during the Christmas season. Spending followed a familiar rhythm: spend, save, then splurge at year-end.

Since 2022, however, the pattern has changed dramatically. The first quarter spending rate has dropped to 54.4 percent, while the second and third quarters turned negative at -16 percent and -141.2 percent, respectively.

This means households are not only cutting back but also financing spending by dipping into savings or accumulating debt. Even the usual year-end rebound is weaker, with spending in the fourth quarter at just 61 percent, below prepandemic highs.

A negative MPC is a red flag. It signals that many households are keeping up their spending not with income, but with credit. This is present bias at work. Rather than cutting back, families choose to borrow so they can maintain the same lifestyle, even if it means pushing the real cost further into the future.

When incomes stagnate…

There is only so much households can borrow to keep spending at the same pace. Families stretch themselves to maintain their lifestyles, even when incomes stagnate and inflation eats into budgets. When borrowing fills the gap, the economy may still look steady but once the financial pressure builds, momentum may eventually weaken.

This slowdown is already showing in the data. In the first quarter of 2024, household spending grew by 8.3 percent compared to 2023, but in the first quarter of 2025 the pace slowed to 7.7 percent.

The second quarter tells the same story. Spending grew by 8.9 percent in 2024, but slipped to 6.8 percent in 2025. Taken together, total household spending in the first half of 2025 grew by 7.2 percent, down from 8.6 percent in the same period of 2024. The trend is clear. Growth is losing steam, and with much of consumption propped up by debt, the risks of a sharper slowdown ahead are rising.

Why does borrowing feel so normal? Because it has become part of everyday life. Taking on debt is seen as a practical choice. Credit cards, “buy now, pay later” apps and installment plans make it easy, while social pressures make it hard to say no.

Present bias then blinds households to the consequences. A family that borrows P20,000 at 3-percent monthly interest may end up repaying almost P30,000 in a year.

That money could have gone into savings or investments, but instead it locks them into repayment cycles.

Break the bad cycle

Breaking free from the psychology of utang takes both awareness and discipline.

Families need to recognize that spending habits are not just cultural but also behavioral.

One way to break the cycle is to reframe the question. Instead of asking, “Can I afford the monthly payment?” ask, “What will this really cost me a year from now?” That small shift can turn the focus from short-term comfort to long-term impact.

Debt can keep the economy afloat for a while, but over time it leaves households and businesses weaker. Real resilience comes when families move away from utang-driven spending and focus instead on saving and sustainable consumption.

In the end, stability doesn’t come from borrowing just to look secure, but from building financial strength that lasts.

Source: Inquirer

Why trust is the new currency in the Philippines

Across Manila, Jakarta and Kathmandu, one force is reshaping markets: public outrage, not just at corrupt politicians, but also at ‘nepo baby’ influencers, entrenched institutions and once-untouchable brands.

In today’s hyperconnected world, trust isn’t given, it’s earned. Lose it, and you lose customers.

Scandals involving misused funds, political favoritism and influencer complicity aren’t just headlines; they’re changing how Filipinos and Southeast Asians choose who and what to support.

Trust is no longer a marketing value.

In the Philippines, it has become the operating currency of business.

Consumers are discerning, watching your values, partners, how you treat employees and how you respond in crises.

In a culture where bayanihan (community support), pakikisama (social harmony) and utang na loob (debt of gratitude) run deep, brands that break these social codes don’t just lose market share, they may never recover.

But building trust is more complex than a checklist of values. 

It demands a shift in power dynamics, long-term commitment beyond headlines and ethical courage rooted in culture, not hidden behind it.

Political: Silence is complicity

Political volatility is the new normal. Billions in flood control funds were misused, stirring public fury.

Celebrities tied to political clans caught in scandals are reputation risks brands cannot ignore. Damage isn’t always visible, but savvy companies know these links quietly erode trust.

Brands must ask: Who do we give power to? Partnerships and public stances now shape your brand’s trustworthiness. Silence in moments of injustice is complicity, an active decision to lose trust.

It’s not enough to avoid controversy. Brands must actively choose where to stand and understand that inaction speaks as loudly as action.

In a country where political and social networks are tightly woven, failing to address uncomfortable truths risks long-term damage to brand credibility.

Economic: Resilience meets impatience

Domestic demand and infrastructure investments remain strong, but cracks are showing.

Power outages, flooding, inconsistent internet and poor roads disrupt businesses and frustrate consumers. Customers want brands to own up fast when things go wrong. Silence kills trust.

Apologies after the fact won’t cut it anymore. Crisis sensitivity and operational empathy are competitive edges. But beyond reaction, brands must build trust into the operating system, ensuring resilience is baked into every process.

Consider how local communities often bear the brunt of infrastructure failures and climate risks.

Brands that invest in community resilience programs or collaborate with local governments are not only doing good, they’re signaling shared responsibility, which builds deep trust.

Social: Gen Z calls the shots

The median Filipino is 26 years old.

This Gen Z cohort, raised amid political drama, climate disasters and social activism, demands honesty, representation and real impact.

They seek accountability, consistency and courage.

Yet, in an age of outrage and fleeting attention, brands must build trust that lasts longer than headlines. Outrage is loud but temporary; long-term trust requires institutionalized integrity, not just reactive messaging.

This means embedding accountability into governance, investing in transparent communication channels and authentically engaging with communities, not just during crises, but daily.

Technological: Build trust, not tricks

Artificial intelligence, automation, and personalization grow, but so does digital distrust. Fake reviews, deepfakes, and misinformation make consumers skeptical by default.

Use technology to enhance real experiences, not just cut costs. Invest in privacy, ethical data use and digital inclusion. Transparency around AI and clear privacy policies build trust faster than flashy tech.

Philippine brands must avoid the temptation to use technology as a gimmick. Instead, technology should be a tool for inclusion and empowerment, especially in underserved areas where digital trust is fragile.

Legal: Compliance is just the baseline

New rules on digital taxation and data protection pile up. Following the law is expected, but not enough.

Trust grows in grey areas, where brands choose openness, care and accountability over technicality. Brands must move beyond compliance toward genuine empathy and proactive transparency.

For example, brands that openly share how they safeguard customer data or involve consumers in feedback loops build far stronger trust than those that only meet minimum legal standards.

Environmental: Walk the talk

The Philippines faces climate disasters head-on. Vague sustainability programs won’t cut it.

Consumers want measurable action: renewable energy, clean water, disaster preparedness. Environmental trust isn’t a nice-to-have, it’s survival.

Brands that lead on environment aren’t just ticking boxes, they’re demonstrating shared risk and shared responsibility.

Because climate change hits the Philippines hard and often, brands that overlook their environmental responsibility risk losing the trust and support they need to stay in business.

Cultural: The heartbeat of trust

Various forces filter through deeply ingrained cultural lenses.

Pakikisama demands social harmony but can silence conflict. Utang na loob builds loyalty but can blur professional lines. Hiya fosters respect but can delay urgent transparency.

Cultural literacy requires brands to navigate these values with courage, not hide behind them. Ethical leadership rooted in local culture is key to unlocking emotional loyalty.

In a society where relationships matter more than contracts, brands must embody cultural values authentically while challenging the norms that allow opacity or excuses.

The Trust Economy: Principles that power the flywheel

The trust economy is a market where people buy based on trust, not just need. Value shifts from reach and price to reputation, accountability and cultural fit.

Here are seven core principles, interconnected like a flywheel, each fueling the next:

Humility–Invitational Mindset: Genuine openness to learn and grow, without getting defensive when challenged. But it’s not just about listening politely or saying “we’re humble.”

It goes deeper: it means actually sharing power and influence with the communities or people you serve, inviting their voices into decisions and respecting their role.

Cultural Literacy–Respectful Connection: Deep understanding of audience context, values, and language. But also the courage to challenge cultural norms that may hinder transparency or accountability.

Empathy–Emotional Alignment: Responding to real needs with compassion, not assumptions. Requires continuous effort and presence, not one-off gestures.

Transparency–Meaningful Honesty: Open communication that reduces fear, confusion and speculation. It must be consistent and proactive, not reactive PR.

Authenticity–Grounded Identity: Consistency across time and touchpoints. Brands must resist becoming mere messaging machines and instead embody true values daily.

Consistency–Reliability Over Time: Actions must repeatedly match words. Trust is built in the invisible, everyday moments, not just big announcements.

Accountability–Worth Believing: Owning mistakes, upholding integrity and being investable long term. Trust requires brands to be vulnerable and willing to change.

These principles work as an interdependent flywheel, each one powers the next, creating self-sustaining momentum. Humility is not just the start, it’s the ongoing fuel.

Trust is not a strategy. It is the operating system

In the Philippines, where betrayal cuts deep and loyalty lasts decades, trust is not a metric. It is how you run your business.

Brands that treat trust as a side effect chase recovery. Brands that embed trust as core infrastructure lead. This means building systems and cultures that live these values daily, with measurable accountability.

Because in a trust economy, every signal matters. Every silence is a statement. Every decision a deposit or withdrawal.

The brands that win in the Philippines won’t be the loudest or flashiest. They will be the clearest, most consistent and most human.

Trust is the future, not just a value, but the foundation. The question is: are we ready to build it boldly, deeply and for the long haul?

Source: Inquirer

Growth outlook slashed

Economy now seen expanding by just 5.2% next year

Philippine economic growth will continue to lose momentum next year as both household spending and investments cool, a Fitch Group unit said.

“Headwinds to growth are mounting,” BMI Country Risk & Industry Research said as it cut the 2026 growth forecast for the country to 5.2 percent from 6.2 percent.

That for 2025 was kept at 5.4 percent — lower than the 2024 result of 5.7 percent — and growth is also expected to slow in the last six months of the year.

Both forecasts fall below the government’s 5.5- to 6.5-percent target for this year and 6.0-7.5 percent for 2026. If realized, growth will have fallen below target for four straight years.

“Growth in H1 2025 was driven by front-loading activity and robust domestic consumption. However, we expect growth to slow in H2 2025,” BMI said in an Oct. 22 commentary.

“Investment is likely to stay subdued in H2 given the uncertain global environment and weak infrastructure spending.”

An ongoing corruption scandal was said to have worsened investor sentiment, with BMI noting that the Philippine Stock Exchange index had fallen to a near six-month low last Sept. 30.

Manufacturing activity has also shown signs of strain, with the purchasing managers’ index contracting for the first time in six months in September.

Exports, meanwhile, sharply slowed in August from a month earlier.

‘Outsized impact’

As for 2026, BMI said that remittance growth was likely to slow due to tighter United States immigration policy and a 1-percent tax.

“A slowdown in remittances will weigh on domestic consumption, which will have an outsized impact on growth given the domestically driven economy,” it said.

The trade balance also expected to worsen given a US-Philippines deal that imposed a 19-percent duty on Philippine exports and none on American goods.

Erratic US trade policies and global uncertainty, BMI added, are seen constraining foreign direct investment flows into the country.

The Fitch unit cautioned that the risks to its forecast were tilted to the downside.

“Should the ongoing probe uncover corruption across other infrastructure projects beyond flood control, it could lead to even tighter scrutiny on government spending and reduce spending substantially below fiscally programmed levels,” it said.

The economy has underperformed so far for the year, averaging just below the 5.5- to 6.5-percent target as of end-June following 5.4-percent and 5.5-percent results in the first two quarters.

Preliminary third-quarter growth data will be released on Nov. 7, and economic managers have warned of a slowdown due to government spending having slowed due to the corruption mess.

BMI expects growth to rebound to 6.2 percent in 2027 and 6.3 percent in 2028.

Deficit to narrow

The Fitch unit, in a separate Oct. 22 commentary, also said that the country was likely to post a narrower fiscal deficit with spending having fallen below target.

BMI said the shortfall was likely to hit 5.5 percent of gross domestic product this year, down from 5.7 percent in 2024, and ease further to 5.4 percent next year.

While revenue collections have exceeded average monthly targets since the start of the year up to August, spending over the same period was behind programmed levels due to an election ban and weak infrastructure disbursements.

The spending shortfall will likely narrow but still undershoot the 2025 budget, BMI said, noting that Budget Secretary Amenah Pangandaman has warned of a slowdown due to the corruption mess.

Government infrastructure spending slowed by 5.6 percent to P798.4 billion as of end-August from P845.3 billion recorded last year, Budget department data showed.

Budget officials said the infrastructure project implementation will likely accelerate in the fourth quarter with the typhoon season over, and ”payment of progress billings may also start to normalize in the latter part of the year as internal controls have been put in place” by the Public Works department.

Fiscal consolidation will remain slow next year, BMI said, with tax collections unlikely to keep up with next year’s proposed P6.79-trillion government budget.

Tariff collections are also expected to fall due to the trade deal with the US.

‘Fiscally unfeasible’

Next year’s fiscal deficit forecast, BMI said, is supported by a “one-off privatization” — equivalent to 0.3 percent of gross domestic product — planned by the government.

“We think that this is fiscally unfeasible over the long run,” it said.

BMI noted that the Philippines’ public finances remain fragile with the debt-to-GDP (gross domestic product) ratio hovering around 60 percent, significantly above the pre-pandemic level of 40 percent.

“Elevated borrowing costs and a narrow revenue base further limit Manila’s ability to deliver large-scale fiscal support without compromising debt sustainability,” it added.

Debt-to-GDP ratio as of end-June, meanwhile, had climbed to 63.1 percent from 62 percent in the previous quarter and 60.9 percent a year earlier. It also exceeded the 60-percent threshold that multilateral lenders consider manageable for developing economies.

Source: Manila Times