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PHL consumption may recover as inflation declines

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PHL consumption may recover as inflation declines

PHILIPPINE CONSUMER EXPENDITURE is expected to recover this year relaxFand improved working conditions, according to Fitch Solutions unit BMI.

“We have a positive outlook for consumer spending in the Philippines through 2024,” it said in an emailed comment on May 8.Flationary pressures, a slightly favorable labor market and lower interest rates are the most important factors basis for the growth of consumer spending.”

BMI expects household spending to increase by 6.4% this year.

The statistics agency said Thursday that household consumption in the US grew by 4.6% Ffirst quarter, slower than 5.3% in the fourth quarter and 6.4% a year ago.

It was the slowest since the 4.8% decline in the US Ffirst quarter of 2021 amid coronavirus pandemic.

Consumption accounts for three-quarters of the Philippine economy.

“Spending will continue to be impacted by the environment of heightened inflationary pressures in 2023, as well as high debt levels and maintenance costs,” BMI said.

“However, relaxationF“The tight labor market will support spending as real wage growth returns to positive territory, which will support purchasing power throughout the year,” it added.

InFInflation accelerated for the third month in a row from 3.7% in March to 3.8% in April. This was within the central bank’s target of 2-4% for a Flike the next month.

The Bangko Sentral ng Pilipinas (BSP) expects inFthis year an average of 3.8%.

“RelaxFThe pressure will provide relief for real household incomes and enable spending growth,” BMI said. It also cited the country’s “strong labor market dynamics.”

“This was driven by a rapid economic recovery, both locally and globally,” the report said. “The Philippine government supported local labor markets, resulting in a tightening that pushed up nominal wages.”

Data from the statistics bureau shows that the unemployment rate rose to a two-month high of 3.9% in March, equivalent to two million unemployed Filipinos.

The unemployment rate fell to 11% from 12.4% a month earlier, the lowest since September 2023.

BMI expects the unemployment rate to improve under the influence of the governmentFfortresses to boost employment, attract more foreign investment and promote more public-private partnerships.

On the other hand, consumer spending could be dampened by a decline in remittances, a weaker economy and geopolitical tensions in the Middle East, which could push up oil prices andFlat.

BMI cited risks to the outlook for remittances. “There are several risks associated with this income in 2024, mainly related to potential Ffinancial stress in several global markets, especially the US, which accounts for 41% of total remittances.”

Remittances rose 3% to $2.65 billion in February, central bank data showed.

“Another risk is the strengthening of the peso, which could reduce the amounts sent back by foreign workers in local currency,” the report said. added. — Luisa Maria Jacinta C. Jocson