Real consumer spending in the Philippines may exceed P16 trillion by 2021, growing from P11.7 trillion this year, with the bulk coming from expenditures on essentials such as food, utilities and transport, Fitch Group’s BMI Research said in a report.
“With that said, we expect essential spending to remain dominant throughout our forecast period due to low [average]income levels and a large rural population,” BMI said in a latest analysis on the Philippines.
The think tank said it expects essential spending to account for 74 percent of total household spending over 2017, increasing to 75 percent of spending over 2021.
In particular, the Fitch Group unit expects that food and non-alcoholic drinks will maintain their dominant role in the Philippines’ retail basket as low household income levels in the country encourage subsistence-based spending.
Along with spending on food and non-alcoholic drinks; housing and utilities and transport costs are also essential expenses for the Filipino household.
“We expect spending patterns in the Philippines to remain fairly static over the medium term, with the top three spending categories retaining their positions,” BMI said.
“Over the medium term, food and drinks will continue to dominate household spending as overall income levels remain low. However, on the back of economic growth, rising wages and rapid expansion of the country’s mass grocery retail (MGR) sector, spending within this category will continue to grow strongly,” it added.
Brighter beyond 2021
Beyond its forecast period, however, BMI said food and drinks spending will become less dominant, as poverty levels fall and the middle class continues to expand.
“While spending within this category will continue to account for a large share of retail expenditure, the focus will shift toward higher-quality products in an increasingly organized retail environment,” it said.
Meanwhile, the think tank said non-essential spending may grow at an average rate of 8.4 percent over the same five-year period.
“Non-essential spending is expected to continue to account for a roughly stable portion of total household retail spending over our forecast period,” it said.
For instance, it said, in 2017, household spending on clothing and footwear is set to account for just 2.4 percent of overall household retail spending, falling to 2.30 percent by 2021.
The small share of households in the $10,000-plus income bracket is expected to show that spending on household goods will remain limited over the coming five years.
With disposable incomes set to remain low for the majority over the forecast period, BMI sees spending on personal care and effects remaining limited, totaling P395 billion in 2017 and rising to P519 billion by 2021.