Survey: Filipinos fear looming recession, to cut spending

THE latest Consumer Pulse Study of TransUnion revealed that most Filipinos expect their income to increase in 2023 but are wary of spending and the looming recession.

These findings are buoyed by stronger-than-expected gross domestic product (GDP) growth and rising employment after the country lifted nearly all Covid-19 restrictions.

The Philippine government eyes a GDP growth of 6.5 to 7.5 percent for 2022. The country’s third-quarter growth stood at 7.6 percent.

But despite this stellar growth, Filipinos are less optimistic about the wider economic outlook, with 42 percent expecting the country to go into a recession in 2023, up by a significant 15 points from the previous quarter, the study revealed.

“Consumers’ mixed sentiments reflect the complex dynamics facing the Philippines along with many other nations, as the world continues to recover from more than two years of disruptions,” said Amrita Mitra, chief operating officer of TransUnion Philippines, in a statement.

“Filipinos are, on one hand, bullish on their household income on the back of strong growth momentum and a growing job market in the past year. On the other hand, high inflation and rising interest rates both domestically and worldwide will continue to weigh on the national economic outlook and consumer spending.”

According to the latest Consumer Expectation Survey of the Bangko Sentral ng Pilipinas (BSP), consumers anticipated that interest and inflation rates may increase, the peso may depreciate against the US dollar, and the unemployment rate may decline in the fourth quarter of 2022, the first quarter of 2023 and in the next 12 months.

In particular, consumers expected the inflation rate to rise to 5.9 percent for the next 12 months, breaching the upper end of the government’s inflation target range of two to four percent for 2022 and 2023.

TransUnion’s Consumer Pulse Study surveyed 1,005 consumers in the Philippines from Nov. 3 to 15, 2022. This quarterly study examines shifting consumer attitudes and behaviors based on the dynamics of income, debt, and identity theft, with respondents ranging from gen Z (born 1995-2004), millennials (born 1980-1994), gen X (born 1965-1979), and baby boomers (born 1944-1964).

Inflation top concern

Moreover, results of the survey also showed that inflation remains the top concern for the fourth consecutive quarter, with 82 percent being very or extremely concerned about the inflation rate.

When asked about how they plan to deal with a potential economic slowdown, around three-quarters of Filipinos plan to cut back on spending (72 percent) and build up savings (69 percent). Across generations, the youngest group, gen Z, appears to have the highest appetite for savings (74 percent) but the lowest desire for reducing spending (65 percent).

In contrast, baby boomers are least keen on savings (49 percent), and gen X are the most open to reducing spending (78 percent).

According to the BSP’s survey, in the fourth quarter of 2022, 24 percent of households availed themselves of a loan in the last 12 months, slightly lower than the 24.9 percent recorded in the third quarter. However, the percentage of households with savings in the country rose to 30.5 percent from 27.5 percent in the third quarter with all income groups registering an increasing trend.

The country’s inflation rate averaged 5.8 percent in 2022 after headline inflation rose slightly to 8.1 percent year-on-year in December, the highest since November 2008, from eight percent in the previous month.

Inflation went up in December as most food and non-alcoholic beverages items recorded price increases.

The central bank said inflation is seen to decelerate in the succeeding months due to easing global oil and non-oil prices, negative base effects, as well as the impact of the BSP’s cumulative policy interest rate increases working their way through the economy.

In the near term, the central bank said it remains prepared to take all monetary policy action necessary to bring inflation back to a target-consistent path over the policy horizon.