Easing inflation to lift consumer spending but household debt a risk

HEADLINE INFLATION is seen to settle within the 2-4% target this year, which could provide a much-needed boost to consumer spending, Fitch Solutions’ unit BMI said.

-  Luisa Maria Jacinta C.Jocson

In a report, BMI said its country risk team expects inflation to average 2.2% this year. “In 2026, inflation will rise further and average 2.7% year on year,” it added.

However, it noted these forecasts are still lower than rates seen before the coronavirus pandemic. Inflation averaged 2.8% from 2015 to 2019.

“If nominal income growth keeps pace with inflation, the purchasing power of consumers will improve, which would be a boost to their spending,” it said.

The Bangko Sentral ng Pilipinas (BSP) projects inflation to average 1.6% for this year and 3.4% for 2026.

This year so far, monthly inflation has settled within the 2-4% target, with the March-to-June print even falling below the target band.

A BusinessWorld poll of 17 analysts yielded a median estimate of 1.2% for the July consumer price index, slower than the 1.4% in June and 4.4% clip a year ago. If realized, this would be the slowest inflation in nearly six years or since the 0.6% print posted in October 2019.

“Easing inflationary pressures will provide relief to real household incomes and enable growth in spending,’ it added.

BMI said it is keeping a “cautious but positive” outlook for consumer spending. Real household spending growth is seen to slow to 4.5% this year from 5% in 2024.

“Spending will remain influenced by the elevated inflationary pressures seen over 2025 as well as currently high debt levels, along with related debt servicing costs,” BMI said.