Remittances from Overseas Filipino Workers (OFWs) along with improving labor sector are seen to remain as the main drivers of Philippines’ consumer outlook.
“The consumer outlook in the Philippines remains bright on the back of a strong economic performance and rapidly rising incomes, influenced by a tight labor market and sustained remittance inflows,” BMI Research said in a research note dated February 14, 2018.
The research unit of Fitch Group forecasts growth of inflows from OFWs to remain strong this year.
On Thursday, the BangkoSentral ng Pilipinas (BSP) reported the 4.3 percent growth of total remittances in 2017 to $28.06 billion from year-ago’s $26.9 billion.
The research note explained that inflows from Filipinos working abroad “act as a vital source of secondary income for Filipinos and will continue to buttress levels of household spending over 2018.”
“With over 2.5 million Filipinos living and working in the US, Philippine households will continue to receive a large share of remittances in USD (US dollar) and therefore depend on the strength of the USD,” it said.
The study, however, cited that “Philippine households receiving remittances denominated in USD will see purchasing power fall as the USD depreciates, acting as a drag on essential spending categories such as food and clothing.”
Amid this, BMI Research continues to be optimistic on Philippine consumers because of improving labor market.
Citing Philippine Statistics Authority (PSA) data, the study noted the decline of unemployment rate to five percent in October 2017, which it said, is one of the lowest levels since 2005.
“We forecast unemployment to come in at 7 percent in 2018, remaining stable from 2017,” it said.
BMI expects inflation to be on the uptrend this year following the rise to four percent last January, the upper end of the government’s two to four percent target for 2017-19, from December 2017’s 3.3 percent.
It, however, discounts this as a negative to consumption.
It explained that “despite a pickup in inflation, consumer confidence in the Philippines remains high, standing at 94.5 on the MasterCard Index in December 2017, up from 91.6 in December 2016.”
“The score is also close to the highest level of 95.2 in June 2016 since the beginnings of records in 1995,” it added.