BMI research sees acceleration powered by benign inflation, lower interest rates
Consumer spending in the Philippines will rise faster in 2025 than last year, powered by benign inflation and lower key interest rates, global think tank BMI Research said in a report released on Wednesday.
BMI Research, a unit of Fitch Solutions, said in a report growth in the country’s real household spending will increase by 5.3 percent this year from nearly 5 percent in 2024.
“Overall, inflation in the Philippines has shown signs of a slow easing. This would support the BSP (rate) cuts, which would, in turn, reduce debt servicing costs for consumers,” BMI said in its “Asia Consumer Watch: Easing Inflation Will Support Greater Consumer Spending In The Philippines.”
Analysts are certain a slower inflation print will compel the Bangko Sentral ng Pilipinas (BSP) to lower its policy rates.
“As such, we hold a positive outlook for consumer spending in the Philippines,” BMI said.
Early-stage uncertainty
BMI acknowledged that in the early period of 2025, spending will remain influenced by the elevated inflationary pressures that may possibly be brought about by the uncertainty in global trad, BMI said.
It added, however, that a tight labor market will support spending, as real wage growth returns to positive territory and supports spending power this year.
The Philippines recorded a four-month low unemployment rate of 3.1 percent in December.
Eye on BSP rate move
BMI’s Country Risk Team will keep an eye on the policy decision from the BSP’s policy-setting Monetary Board.
“We expect the BSP to cut its policy interest rate by 25 (basis points) next week as the peso has stabilized in recent weeks, inflation is barely above the 2 percent target’s lower bound at 2.1 percent, while growth underperformed government targets in 2024,” BMI said.
The BSP on Monday said lower prices of rice, fruits and vegetables in March may have reined in inflation possibly within the 1.7 percent to 2.5 percent range.
In February, inflation came in at 2.1 percent, easing from 2.9 percent in January. The Philippine Statistics Authority (PSA) is scheduled to release the inflation numbers this Friday, April 4.
The latest data from the PSA showed household consumption contracted to 4.7 percent in the the fourth quarter of 2024 from 5.3 percent a year earlier
For full-year 2024, the Household Final Consumption Expenditure numbers grew 4.8 percent, a slowdown from 5.6 percent in 2023.
