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

Firms expect 5.2% pay hike in 2026 as 1 in 5 workers plan to quit

Companies in the Philippines are projecting only modest pay increases next year despite facing the steepest employee turnover rates in Southeast Asia.

The 2025 Salary Increase and Turnover Study by British-American consulting firm Aon projects an average 5.3% salary increase across Southeast Asia in 2026, signaling a stable but cautious compensation outlook as firms confirm a region-wide retention crisis and widening skills gaps.

“The 5.3% regional average reflects stable growth but underscores that competitive pay alone is no longer enough to retain skilled employees,” Aon said in its analysis.

The study analyzed data from more than 700 companies across six Southeast Asian markets, including Indonesia, Malaysia, Singapore, Thailand, Vietnam, and the Philippines.

The study shows that while most countries in Southeast Asia are keeping pay hikes moderate, Vietnam leads the region with a projected 7.1% salary increase next year, followed by Indonesia at 5.9%.

By contrast, Singapore and Thailand are among those keeping a tighter rein on compensation growth, with average increases of 4.3% and 4.7%, respectively.

Philippine companies' dilemma

In the Philippines, salaries are expected to rise moderately by 5.2% in 2026, which is slightly lower than this year’s 5.3% increase. The rate just sits below the regional average.

The country, however, is seen to have highest attrition rates in the region entering 2026, as one in five employees is expected to voluntarily leave their companies.                      

Source: Aon plc — 2025 Salary Increase and Turnover Study.

 This projected 20% attrition rate in the Philippines surpasses Singapore’s 19.3% and Malaysia’s 18.2%, underscoring a growing challenge among Philippine employers to hold on to skilled staff amid rising job mobility across industries. 

Sectors most affected include information technology, sales, engineering, and cybersecurity, where global demand for digital talent continues to pull Filipino workers toward better-paying opportunities abroad and in multinational firms.  

Source: Inquirer

Pinoy Gen Zs emerging as self-rewarding, intelligent consumers–study

“Deserve ko ‘to!” (I deserve this!)

It’s a phrase that Filipinos have come to use to reaffirm their spending habits, which sometimes can be described as compulsive, especially when facing tempting discounts and promos that are offered right around pay days.

It’s a behavior that’s seen strongly among today’s Gen Z consumers, who spend primarily to reward themselves, says a recent study—one that is crucial for brands to understand in order to cater to this growing demographic, and facilitate immersive shopping experiences that promote convenience and appeal to their personal preferences.

The study, jointly conducted by Filipino-focused sociocultural research firm The Fourth Wall and communications firm Uniquecorn Strategies, says that three out of four Filipino Gen Z consumers living in urban areas shop online because they believe that they deserve it—a philosophy driven by their desire for happiness, fear of missing out on trends and the need to simply give themselves a gift for overcoming work or study-related stress.

The survey, conducted among 400 Gen Z consumers in Metro Manila, shows that 50 percent of a typical Filipino Gen Z’s finances come from parental allowances, while the other half come from full-time work, businesses, or side gigs. On average, they make six online purchases per month, ranging from a minimum of one to a maximum of 10.

Citing prior research, the study notes that there are about 41 million Gen Zs (born between 1996 and 2010) in the Philippines, making up about 38 percent of the total population, according to Philippine Statistics Authority’s latest official 2020 census.

“The young generation is rapidly becoming a significant portion of the consumer market, and is already shaping market trends, especially the e-commerce space,” says John Brylle Bae, research director at The Fourth Wall. “This self-rewarding behavior among Filipino Gen Zs stems from their growing self-awareness, driving them to seek rewards that affirm that sense of self-worth.”

The research, which leveraged machine learning clustering and social listening, also identify five dominant psychographic profiles of urban Filipino Gen Z consumers, who have distinct preferences and motivations:

• the Austere Austins, who prioritize budget-friendly options;

• the Budgetarian Bellas, who focus on cost-effective choices;

• the Frugal Fionas, who advocate for affordable and sustainable products; and

• the Deserving Desires, who seek rewards for their hard work and dedication.

Intelligent buyers

Overall, however, Filipino Gen Zs are intelligent buyers, the study states. They splurge based on quality (81 percent) and price competitiveness (10 percent), and are most likely to repurchase from the same brand that consistently delivers high-quality and affordable products. Still, they are willing to try other brands, even if they are emotionally attached to their preferred ones.

The study also shows that Filipino Gen Zs buy based on trust and personal affinity. Upon hearing about a product, 81 percent do their due diligence and look up customer reviews first on shopping platforms and Google.

Word of mouth, therefore, is still one of the primary ways they discover products (60 percent), while others rank social commerce ads (59 percent) as important to their shopping experience. They take cues from the people they deeply trust, which include friends and family. They are also more influenced by honest, objective, or out-of-pocket reviews from influencers or content creators with the right expertise.

These digital natives, naturally, also prefer the convenience of online shopping. Almost all the respondents (92 percent) use their own mobile phones for purchases and prefer cashless payment methods (53 percent).Given this, the study identifies several key opportunities for brands to connect with Filipino Gen Z consumers more effectively:

There is a significant potential for advertising on more personal yet credible emerging media platforms such as podcasts, and brands can leverage self-expression and identity in their branding to establish a personal affinity with target customer personas.

Tuning into these behaviors, says Uniquecorn Strategies founder and CEO Dean Bernales, will ultimately help brands come up with the right strategy to employ to capture the Gen Z market.

“Retailers should pay close attention to the shopping desires and needs of Filipino Gen Zs. Brands need to reassess their supply chain strategies and enhance their social commerce platforms to build trust, create personal connections and develop a relatable image to capture the young market,” Bernales says.

Source: Inquirer