Essentials make up bulk of Philippines retail spend

Filipinos spend the bulk of their money on essentials such as food, utilities and transport, according to Philippines retail research.

Real consumer spending is expected to exceed PHP16 trillion (US$323 billion) by 2021, growing from PHP11.7 trillion this year, says a report from BMI Research.

Essential spending is expected to remain dominant throughout the forecast period because of low average income levels and a large rural population.

The think tank said it expects essential spending to account for 74 per cent of total household spending this year, increasing to 75 per cent of spending in 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.
Housing, utilities and transport costs are also essential expenses for the Filipino household, says the research. “We expect spending patterns in the Philippines to remain fairly static over the medium term, with the top three categories retaining their positions.”

Over the medium term, says the report, food and drinks will continue to dominate household spending as overall income levels remain suppressed. 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.

Beyond its forecast period, BMI says 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 organised retail environment.”

Meanwhile, BMI says non-essential spending may grow at an average rate of 8.4 per cent 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.”

For instance, household spending on clothing and footwear this year is set to account for just 2.4 per cent of overall household retail spending, falling to 2.30 per cent by 2021.

The small share of households in the $10,000-plus income bracket is expected to show that spending on household goods will be limited over the coming four years.

With disposable incomes set to stay low for most Filipinos over the forecast period, BMI sees spending on personal care and effects remaining limited, totalling PHP395 billion this year and rising to PHP519 billion by 2021.

 

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