Filipinos are tightening their belts

Filipino consumers are cutting back on spending and bracing for higher expenses even as most remain optimistic about future income prospects, a TransUnion study showed.  

TransUnion’s Consumer Pulse Study for the second quarter of 2025 showed that consumers were growing more cautious with their finances, with inflation continuing to top their concerns.

“Filipino households are approaching their finances with cautious optimism. While they’re aware of ongoing challenges like inflation and rising costs, many remain hopeful about their financial future,” said Weihan Sun, TransUnion’s research and consulting principal for Asia-Pacific.

“This mindset is reflected in their actions — cutting back on non-essential spending, saving consistently, and staying on top of debt,” Sun added.

While 73 percent of respondents said they expected their incomes to rise over the next 12 months, nearly half (44 percent) admitted they may be unable to fully pay at least one of their current bills or loans.

Inflation — cited by 83 percent of respondents — remained the biggest worry, followed by job security (59 percent) and interest rates (40 percent). The findings were said to have highlighted continued price pressures despite signs of improving income.

TransUnion said that almost half (47 percent) of Filipino consumers reduced discretionary spending on non-essentials such as dining out, travel and entertainment over the past three months. 

A quarter also canceled or scaled back on digital subscriptions and services, while 45 percent boosted contributions to emergency savings and a third accelerated their debt payments — signs of a shift toward financial prudence.

Spending projections for the next three months suggest this trend will continue, with 42 percent planning to trim discretionary expenses further and 43 percent expected to delay or cut back on major purchases.

“These forecasts suggest even if most consumers were optimistic about their financial status, they were nevertheless cautious of economic headwinds (especially inflation) and were adjusting expenditures,” TransUnion said. 

“The data indicates a financially active consumer base moving with the times to balance spending management with selective investment in their financial well-being,” it added.

While more Filipinos now believe they have sufficient access to credit —  44 percent from 38 percent a year ago — concerns about cost and rejection continue to discourage borrowing.

Over half (57 percent) of consumers who considered applying for new credit or refinancing existing loans ultimately abandoned their plans, mainly due to fears of being denied due to income or employment status (30 percent) or the high cost of borrowing (29 percent).

Even so, demand for credit remains steady. Among consumers intending to borrow in the next 12 months, Gen Z (58 percent) and Millennials (52 percent) led the charge, with personal loans, “buy now, pay later” options and new credit cards topping the list of preferred products.

“It is encouraging to see that more Filipinos now consider credit more accessible. However, the fact that over half of potential borrowers still walk away from their credit plans tells us there is still work to be done,” Sun said. 

“Lenders have an opportunity to bridge this gap by offering more inclusive solutions — ones that not only meet practical needs but also build trust and address the emotional barriers that often come with borrowing.”

The report also showed persistent cybersecurity threats and gaps in digital financial literacy. A majority (56 percent) reported being targeted by online fraud schemes in the past three months, primarily via phishing (44 percent) and smishing or SMS scams (40 percent).

While most took protective steps such as changing passwords or checking account activity, 15 percent admitted to doing nothing — with over half citing confusion about what actions to take.

Meanwhile, only 27 percent of consumers check their credit reports monthly, and one in five do not monitor their credit at all. Although the majority (68 percent) still consider credit monitoring important, this marked a dip from 72 percent last year.

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Source: Business World

Consumer spending to drive growth this year

Robust household consumption is seen to prop up the economy this year, Fitch Solutions’ unit BMI said, but warned that inflationary pressures and other risks could dampen this outlook.

“We hold a positive outlook for consumer spending in the Philippines in 2025. For 2025, we expect it to be driven mostly by strong economic growth and its feed-through into higher disposable income, as well as a stable labor market,” BMI said in a report.

BMI expects Philippine gross domestic product (GDP) to grow by 6.3% this year and 6.7% in 2026. These projections are within the government’s 6-8% target for both years.

The Philippine economy grew by 5.6% in 2024, missing the government’s 6-6.5% target. 

“A deteriorating external demand will likely be a drag on the Philippines’ GDP. However, the private final consumption expenditure will be positive,” BMI said.

Household spending is seen to accelerate to 5.3% this year, it said. Private consumption, which accounts for about three-fourths of the economy, grew by a lackluster 4.8% in 2024.

Consumer confidence has also shown “upward momentum,” amid the continued recovery from the pandemic, BMI said.

In the central bank’s latest consumer expectations survey, an improvement was seen in consumer confidence for the first quarter of this year and the next 12 months. This, amid a more upbeat outlook on higher income, additional sources of income and more available jobs.

“Easing inflationary pressures will provide relief to real household incomes and enable growth in spending,” BMI said.

“A tight labor market will support spending, as real wage growth returns to positive territory, which will support purchasing power over the year,” it added.

On the other hand, BMI noted that risks continue to weigh on private consumption, such as prolonged high inflation and weaker remittances.

“These risk factors will adversely affect household purchasing power, while geopolitical tensions have also emerged as a risk that is likely to impact inflation and interest rates.”

“Although inflationary pressures have largely eased in many markets, price levels remain high, and many households have not yet experienced real wage growth sufficient to restore purchasing power to their pre-2022-2024 inflationary shock levels.”

BMI expects inflation to average 3.3% this year, in line with the Bangko Sentral ng Pilipinas’ (BSP) own forecast. Headline inflation remained steady at 2.9% in January.

“If nominal income growth does not keep pace with inflation, the purchasing power of consumers will deteriorate, which would be a drag to their spending.”

“Prolonged inflation, particularly in relation to food, will mean that consumers will have to increasingly allocate more of their disposable income towards meeting necessities,” it added.

Meanwhile, the peso is seen to “depreciate slightly” this year and settle at P58 against the dollar.

“Despite the roughly 1.7% depreciation of the peso, this is still a relatively positive outcome compared with the depreciation of 11% seen in 2022 and the 2% seen in 2023.”

“The weaker rate in 2025 is due to the combination of a higher expected consumer price index in the Philippines as well as the US Fed’s hawkish tilt,” it added.

In 2024, the peso weakened by 4.28% to close at P57.845 versus the dollar from its end-2023 finish of P55.37. The local currency sank to the record-low P59-per-dollar level thrice last year.

“While persistent intervention by the BSP in the forex market will help to curb depreciatory pressures on the peso, earlier rate cuts by the BSP relative to the Fed will continue to weigh on the currency.”

“Nevertheless, the relatively stable rate will mean that the Philippines, which remains heavily reliant on imports to meet local demand, will see relative stability in import inflation,” BMI added.

Elevated household debt also poses a risk to consumer confidence, BMI said.

“It not only constrains future borrowing capacity but impacts current disposable income levels. This is particularly true as debt servicing costs rise in response to increases in interest rates.”

“In many markets, central banks rapidly hiked interest rates during the 2022-2023 high inflationary period, reaching levels to which most households have not been accustomed over the past decade,” it said.

From mid-2022 to late 2023, the BSP was the most aggressive central bank in the region as it hiked key rates by 450 basis points (bps) to tame inflation.

The BSP began its easing cycle in August last year, lowering borrowing costs by a total of 75 bps by end-2024. 

“While interest rates will not reach the previous historical lows of the last decade, easing monetary policy will alleviate some debt servicing cost pressures,” BMI said.

Source: Business World

Pinoy consumer preferences, reshaping business strategies

The Philippine market is undergoing a transformative period, influenced by digital innovation, changing consumer behaviors, and economic pressures.

Google, Temasek, and Bain & Company recently released their e-Conomy SEA 2024.

Let us reconcile its findings with Synergy Market Research's MarketInsights Report, PwC CEO Survey 2024, Havas Ortega's reports "Is the Party Over?" and "Prosumer Trends 2024.

These reports collectively provide a comprehensive view of the current market dynamics, highlighting opportunities and strategies for businesses in the retail, e-commerce and technology sectors.

E-commerce in the Philippines has seen remarkable growth, as highlighted in e-Conomy SEA 2024, which values the sector at $21 billion following a 23 percent increase.

Video commerce has emerged as a significant driver, accounting for 20 percent of this growth, fueled by live streaming and short-form videos. Businesses can capitalize on this trend by investing in video-led strategies, such as live selling on platforms like TikTok and Facebook, and enhancing product listings with engaging visuals.

Additionally, the report notes that Filipino consumers are increasingly sophisticated, demanding personalized digital interactions. AI-powered tools can help retailers offer tailored recommendations, targeted promotions, and customized shopping experiences.

The MarketInsights Report focuses on the financial challenges faced by Filipino consumers, emphasizing cost-cutting measures in categories like dining out, clothing and non-essential items. It highlights the increasing demand for value-driven consumption, urging retailers to offer affordable bundles, discounts, and loyalty programs that resonate with budget-conscious shoppers.

Similarly, Prosumer Trends 2024 examines evolving consumer values, including a strong preference for meaningful purchases and sustainability. This report underscores the importance of aligning product offerings with these priorities to build lasting consumer trust.

Sustainability and inclusivity are becoming central to purchasing decisions, as outlined in both Is the Party Over?, MarketInsights Report, and Prosumer Trends 2024. Filipino consumers now prioritize eco-friendly products and ethical practices, prompting businesses to integrate sustainability into their offerings. This can include the use of reusable packaging, ethical sourcing certifications, and environmentally friendly products. Marketing campaigns should emphasize these efforts to appeal to conscious consumers.

Digital payments have grown significantly, with e-Conomy SEA 2024 reporting a 22 percent increase in adoption. QR payments and e-wallets have become mainstream, presenting opportunities for businesses to streamline transactions and enhance customer convenience. Retailers and tech companies should ensure seamless integration of these payment options and explore partnerships with leading e-wallet providers to offer exclusive incentives.

Retailers can also diversify their product offerings to cater to a wide spectrum of customers, from budget-conscious shoppers to premium, eco-conscious buyers. Localization of marketing strategies, such as using Tagalog and regional dialects, can help businesses connect culturally and emotionally with their audience. Moreover, enhancing omnichannel strategies by integrating online and offline shopping experiences, such as click-and-collect options, can meet evolving consumer expectations.

For tech and digital companies, the reports collectively emphasize the critical role of AI and digital transformation in driving innovation. The PwC CEO Survey 2024 highlights AI adoption as a key investment area, with companies leveraging the technology for customer engagement, operational efficiency and data-driven decision-making. e-Conomy SEA 2024 similarly emphasizes AI's potential, particularly in delivering hyper-personalized experiences. Tech companies can develop AI-based tools tailored to the Philippine market, such as chatbots for e-commerce, predictive analytics for sales forecasting, and dynamic content delivery systems.

Cybersecurity is another pressing concern, as noted in PwC CEO Survey 2024 and the MarketInsights Report. Businesses adopting digital platforms must prioritize robust cybersecurity measures, including data encryption, fraud detection tools, and secure payment systems, to build customer trust and protect sensitive information.

Localization of digital tools is a recurring theme across e-Conomy SEA 2024 and Prosumer Trends 2024. Companies should focus on creating culturally relevant interfaces and providing support in local languages. Expanding services to underserved markets, including rural areas, can also drive growth and inclusivity.

Sustainability and tech innovation intersect in significant ways, as highlighted in PwC CEO Survey 2024 and Is the Party Over? Businesses are encouraged to develop energy-efficient software, promote cloud-based solutions to reduce reliance on physical hardware and communicate these benefits to stakeholders. Investing in AI talent, collaborating with academic institutions, and upskilling teams can further strengthen tech capabilities tailored to local needs.

Additionally, leveraging government initiatives like the Philippine Digital Infrastructure Project can help bridge connectivity gaps and expand digital reach.

Customer education campaigns can play a pivotal role in driving the adoption of AI, cybersecurity, and digital payments. Companies can partner with e-commerce, fintech, and retail platforms to create an integrated ecosystem that enhances scalability and efficiency.

The five reports collectively underscore a rapidly evolving Philippine market shaped by digital transformation, economic pressures, and shifting consumer values. By embracing these insights and prioritizing affordability, sustainability and innovation, businesses in retail, e-commerce and tech can secure a competitive edge while fostering meaningful connections with Filipino consumers.

Source: Manila Times