ADB expects PHL household spending to improve in 2026

The Asian Development Bank (ADB) said household consumption in the Philippines is likely to rebound in 2026 on the back of easing inflation and interest rates, after a corruption scandal and adverse weather dampened spending in recent months.

However, analysts warned that depending on tax relief to spur consumption could undermine fiscal consolidation efforts.

ADB Country Director for the Philippines Andrew Jeffries said household final consumption expenditure, which accounts for over 70% of the economy, is expected to “strengthen in 2026 amid low inflation and accommodative monetary policy.”

“More broadly, policies need to focus on raising incomes and reducing vulnerability,” he said.

Mr. Jeffries said these measures should include expanding higher‑quality employment, boosting productivity through skills upgrading, and targeted social protection for vulnerable households.

This comes as private consumption growth moderated in the third quarter of 2025, particularly discretionary spending on recreation, hotels and restaurants, partly due to weather‑related disruptions, he said.

Data from the Philippine Statistics Authority (PSA) showed household final consumption expenditure slowed to 4.1% in the third quarter from 5.2% a year ago.

This was the slowest since the 4.8% contraction in the first quarter of 2021. Excluding pandemic years, it was the slowest growth in private spending since the 2.6% increase in the third quarter of 2010.

The PSA will release the fourth-quarter and annual 2025 preliminary gross domestic product (GDP) data, including household consumption, on Jan. 29.

Despite the slower growth in the third quarter, the ADB said spending on essentials, particularly food, remained resilient, supported by low inflation.

Inflation picked up to 1.8% in December from 1.5% in November. This brought the average to 1.7% in 2025.

For 2026, the central bank sees inflation accelerating to 3.2%, but still within the 2-4% target band.

The Bangko Sentral ng Pilipinas (BSP) has so far delivered a total of 200 bps in cuts since August 2024, after it lowered its policy rate by 25 bps to an over three-year low of 4.5% at its Dec. 11 meeting, amid subdued inflation and sluggish growth.

The Monetary Board is scheduled to hold six regular policy meetings in 2026, with the first one set on Feb. 19.

TAX RELIEF?

To spur household demand and ease public concerns over flood control issues, a lawmaker had proposed giving tax relief to Filipinos, but analysts were divided, saying the measure could lift spending but risk undermining fiscal consolidation.

Senator Erwin T. Tulfo filed a bill in the Senate in October to provide a one-time, one-month income tax holiday for individual taxpayers receiving compensation income, effective on the first payroll month immediately following the bill’s approval.

Senate Bill No. 1446, or the One-Month Tax Holiday bill, remains pending at the committee level.

“A tax relief will only delay fiscal consolidation,” Foundation for Economic Freedom President Calixto V. Chikiamco said.

The Marcos administration aims to bring the deficit down to P1.56 trillion, or 5.5% of GDP, in 2025, and eventually to P1.55 trillion, or 4.3% of GDP, in 2028.

Mr. Chikiamco noted that many factors influence consumer spending, such as unemployment, inflation, and wage growth.

“Depreciation of the peso will increase OFW (overseas Filipino worker) incomes and spur consumer spending without decreasing government revenues,” he added.

The peso has breached the P59-a-dollar mark several times since November and sank to a record low of P59.22 on Dec. 9.

Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., argued that tax relief can boost private consumption, but the program has to be “smart and targeted.”

“Tax relief can help revive spending, especially after a year of high prices and tight budgets,” he said.

“Focus on essentials like VAT (value-added tax) breaks on food and utilities, and give relief to lower- and middle-income families who are more likely to spend,” Mr. Ravelas added.

However, he said tax relief must be “time-bound,” and paired with job creation and price stability, so people feel confident to open their wallets.

“The problem on spending is due to the uncertain environment due to ‘floodgate,’ the government should fix its trust issues so confidence will come back,” Mr. Ravelas said, referring to the flood control mess.

Meanwhile, the ADB’s Mr. Jeffries said improving VAT efficiency and sustaining gains in tax administration through digitalization are key to raising government revenue.

“The proposed tax on single-use plastic bags is a notable measure, serving both revenue and environmental objectives by helping address plastic and solid-waste challenges,” he said.

BIR Commissioner Charlito Martin R. Mendoza earlier said the proposed tax measure is projected to generate between P6 billion and P10 billion annually, “depending on the rate and coverage.”

“Beyond taxation, sustained improvements in expenditure efficiency and public financial management are crucial, particularly to strengthen investment planning, project execution, and governance,” Mr. Jeffries said.

Source: Business World

Christmas cheer still propels consumer spending

‘Tis the season to be jolly— and for many Filipinos, it is the prime period to spend, too.

New data from international payments provider Visa show that card transactions by Filipinos rise steadily every December, showing how the Christmas season continues to drive consumer activity in the Philippines.

However, this spending surge plays out differently depending on where Filipinos choose to spend their holidays.

For those staying in the country, spending peaks around Dec. 23, a period Visa describes as the height of the “holiday rush in malls and commercial districts” as shoppers scramble to make last-minute gift purchases ahead of family gatherings.

By contrast, Filipinos traveling overseas tend to open their wallets after Christmas. Their spending peaks on Dec. 29, reflecting “continued leisure and travel-related purchases during overseas vacations,” before tapering off toward the New Year.

Overall, Filipinos abroad register a higher spending peak than those who remain at home. Interestingly, spending drops sharply on Christmas Day itself for both groups, before climbing again in the days between Christmas and New Year.

Visa says the data points to the enduring value of Christmas, whether celebrated at home or abroad.

“Christmas brings people together and our data [underscore] the holidays’ enduring sociocultural and economic significance to the country,” says Jeffrey Navarro, country manager at Visa Philippines.

Online holiday shopping

As e-commerce continues to expand, a growing share of holiday spending is also moving online, according to data from Lazada.

Electronics sales during its 12.12 sale surged by as much as 1,100 percent compared with regular days, making the category the top seller. The spike reflects how “middle-class households are increasingly turning to e-commerce to improve their home environments,” Lazada says.

Branded goods emerged as winners during the sale, as products at LazMall recorded some of the strongest sales during the campaign. Samsung, Dyson, JBL Nike, POCO, Colgate, UFC, BLK Cosmetics and DDPA were among the top-performing brands.

This trend, Lazada says, suggests that Filipino shoppers are becoming more deliberate, increasingly gravitating toward globally trusted brands even in the digital marketplace that’s crowded with low-cost, third-party alternatives.

Foreigners join spending rush

Foreign visitors in the Philippines also contribute to the holiday spending boom, according to Visa data.

Inbound card payments made by foreign tourists also surge during the Yuletide season, with visitors from the United States leading the bunch, followed by those from Taiwan, Japan, South Korea and Singapore.

Much of this spending is concentrated in the buzzing city of Makati, followed by Parañaque, Cebu, Angeles and Davao.

Spending preferences also vary by nationality. Visitors from the United States, South Korea. Singapore, Australia and Hong Kong allocate most of their spending on lodging, while Taiwanese and Japanese tourists spend more on entertainment.

Indian travelers, meanwhile, spend the largest amount on education and government-related payments. Visitors from Canada and the United States prioritize spending on groceries and food during the holidays.

Source: Inquirer

How to enjoy your money without regret

Many people work hard to save and invest, yet when it comes to spending, they often feel guilty. For some, every purchase feels like a dent in their financial future. For others, impulsive buying leads to regret the next day. Either way, money becomes a source of stress rather than enjoyment.

Behavioral finance helps explain why. Studies show that people do not always spend rationally. Emotions, habits and mental shortcuts influence our decisions, sometimes leading to happiness and sometimes to regret. By understanding these patterns, we can use our money with less guilt and fewer regrets.

Traditional economics once assumed that people act rationally and that they weigh costs and benefits before making decisions. But research in psychology and behavioral finance shows that reality is far more complex.

Money is more than a way to pay for things. It carries emotions, which explains why people feel outraged when they see politicians misuse public funds on lavish lifestyles. Every choice to spend or save reflects our fears and hopes.

One reason spending feels complicated is what psychologists call anticipated regret.

Studies led by Thomas Gilovich of Cornell University in 1998 on anticipated regret show that people often avoid spending because they imagine regretting it later. They picture a future where they wish they had saved instead.

Ironically, the same thing happens in reverse for impulsive spenders. They focus only on the excitement of buying and forget the regret that may come later. This push and pull is why spending often feels more emotional than logical.

Mental accounting

Another reason is what researchers call mental accounting, a concept popularized by Richard Thaler in 1985. His study, published in the journal Marketing Science, showed that people divide money into separate mental “accounts,” such as essentials, savings and discretionary use.

Take dividends or bonuses as an example. Many people see them as money that is safe to spend, while selling investments feels more like taking money out of your nest egg. The money may be the same, but the psychology is very different.

If money is meant to make life better, then the real question is how we spend it in a way that truly makes us happy.

Back in 2013, behavioral researchers Elizabeth Dunn and Michael Norton explained in their book “Happy Money” that happiness has less to do with how much you spend and more with what you spend it on.

Their research showed that experiences such as a vacation, a family celebration or even a simple day out with friends tend to create deeper and longer lasting joy than material purchases.

A brand new gadget or luxury item might thrill you at first, but the feeling fades quickly while memories often grow more valuable with time.

Meaningful spending

Another study by Cassie Mogilner Holmes of UCLA and her colleagues in 2016 found that spending brings the most satisfaction when it matches personal values.

People who used money to strengthen relationships, pursue growth or support meaningful goals reported higher life satisfaction than those who saved too much or spent without purpose.

What this tells us is simple. Happiness is not about the size of your bank account but about how well your money supports the life you want to live.

Imagine three retirees with the same savings. The first is so worried about running out of money that he barely spends. He skips the trips he dreamed of and avoids hobbies he once wanted to try.

When his health finally slows him down, he realizes the real loss was not the money but the memories he never made.

The second goes the other way. He spends too much on luxuries and drains his savings too fast. By the time he gets older, the lifestyle he once enjoyed becomes impossible to sustain. What remains is stress instead of comfort.

Then there’s the third. She sets aside enough for essentials and long-term security but also reserves a portion for enjoyment. She books trips early, savors the excitement of looking forward to them and creates memories with her family. By striking this balance, she avoids both the regret of holding back too much and the pain of spending too much.

Live without regrets

These examples show what research has been saying all along. Regret usually does not come from spending money, but from spending it without purpose. If you save only out of fear, money does not protect you, it just traps you.

If you spend it carelessly, it leaves you feeling empty. But if you use it for experiences and relationships that truly matter, it gives life more meaning.

The psychology of spending teaches us that financial success is not just about building wealth. It is about using money in ways that create both security and fulfillment.

Research by Gilovich, Thaler, Dunn, Norton and Holmes all point to the same truth that happiness with money is never about the total you keep, but about whether it supports the life you want to live.

Source: Inquirer