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The increasing number of tech-savvy families in the middle and upper-income brackets is boosting the demand for leisure items in the Philippines, said BMI, a unit of the Fitch Group.
This trend is expected to benefit the country’s highly competitive retail sector. Spending on electronics and major renovations is projected to increase by 7.5 percent in 2024 to reach P270.4 billion, according to a commentary sent to journalists on Wednesday.
From 2025 to 2028, the Fitch unit said spending on household goods is projected to hit an annual growth of 7.1 percent, reaching P354 billion by end of the forecast period.
“Spending will be supported by a technology-literate, urban middle class with increasing amounts of disposable income,” BMI said.
A boon to the local market
Such an outlook would be a boon to the domestic consumer goods market, where retail titans like SM are competing with other local and international players of different sizes like Sweden-based IKEA and Hong Kong-based Japan Home Center.
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And that rivalry is expected to get hotter after the enactment of the Retail Trade Liberalization Act that sought to simplify and ease restrictions for foreign retailers that wish to set up shop in the Philippines.
The healthy competition, in turn, would give consumers access to a wide range of products through brick-and-mortar stores and online shops, BMI said. At present, BMI said retail formats designed to capture consumers vary from out-of-town superstores to small city-center display stores and a robust online sales sector,” it said.
“Improvements in the housing market and increasing numbers of households in the middle- and upper-income brackets will encourage expenditure on aspirational products, such as consumer electronics and home furnishings,” the Fitch unit added.
Zooming out, BMI said in a previous report that consumer spending is projected to grow 6.3 percent in 2024 to P12.8 trillion in real terms on the back of easing inflation and a tight labor market.
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That forecast is in line with BMI’s expectation of gross domestic product growth of 6.2 percent this year which, if realized, would be faster than the 5.6 percent expansion in 2023, but below the government’s growth target of 6.5 to 7.5 percent for 2024.
But BMI said the high interest rate environment is one of the major risks to consumption this year, especially for households that had taken advantage of low borrowing costs at the height of the pandemic.
Overreliance on remittances, a major lifeline for many Filipino families, is also seen as a threat to BMI’s outlook.
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