With economic growth slowing to its lowest pace since the second quarter of 2023, economists pointed to lower inflation and eased monetary policy as potential catalysts for boosting consumption, although trade barriers and peso volatility could hinder this progress.
"Admittedly, a continued boost from lower inflation and looser monetary policy should support consumption," stated London-based think tank Capital Economics in its Nov. 7 report.
Shivaan Tandon, markets economist at Capital Economics, believes that private consumption in the Philippines has already passed its worst point. However, she doubts "this pace of consumption growth is sustainable."
Remittances, which comprised nine percent of the economy, are expected to grow at a slower pace due to weaker global growth, potentially weighing on overall economic growth.
Looking ahead, Tandon anticipates increased risks to consumer spending in the country, likely to emerge following Trump's return to the White House.
"In particular, we now expect the US dollar to strengthen and no longer expect bond yields in the US to drop back," Tandon said.
This could lead the Bangko Sentral ng Pilipinas (BSP), which closely monitors US Federal Reserve moves, to hold back on cutting interest rates.
Meanwhile, the Bank of the Philippine Islands (BPI) highlighted a notable 3.2 percent increase in food spending in the third quarter—a significant jump from the growth seen over the past year.
According to Emilio S. Neri Jr., BPI senior vice president and lead economist, this rise suggests that household spending might be recovering, likely aided by lower inflation.
Neri noted that in the previous year, consumers had been spending less due to high inflation.
Despite this uptick, the government's growth target for this year remains nearly impossible to meet.
National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan stated that the country's gross domestic product (GDP) growth needs to accelerate to at least 6.5 percent in the last quarter to achieve the target.
"Consumption growth needs to improve further in order for GDP growth to surpass 6 percent," Neri asserted.
He noted that before the pandemic, consumer spending contributed approximately 4.3 percent to GDP growth. In contrast, it only contributed 3.7 percent in the third quarter, indicating a weaker boost to the economy.
Despite this, the Philippine economy has averaged 5.8 percent growth this year, making it the "second-fastest-growing economy among the five ASEAN countries."
Neri believes that the central bank could use the latest GDP figures to justify a potential rate cut in December. However, uncertainties abroad, heightened by Trump's victory in the US presidential race, could hinder a rate cut as peso volatility rises.
"The BSP may find it more appropriate to keep rates steady if the peso weakens sharply in the coming weeks," he concluded.
On the other hand, Oxford Economics is optimistic about the country's economic growth in the final quarter. It expects holiday spending to boost fourth-quarter growth, likely bringing 2024's annual growth to 5.8 percent year-on-year.
"We expect the central bank will cut their policy rate by another 25bps at its next meeting in December, and by 25bps each quarter in the coming year. More accommodative monetary policy settings will support growth next year," Oxford Economics stated.
However, like Tandon and Neri, Oxford Economics acknowledges the downside risks associated with Trump's return and factors in China's outlook.
"The uncertain growth outlook of China (largely depending on the effectiveness of its stimulus policies), and risks of US trade barriers under Trump's return, pose material downside risks to our forecasts in the near to medium term," Oxford Economics said.
Tandon emphasized that a major uncertainty for future foreign demand is whether Trump's proposed tariffs will be implemented and how significantly they will impact the economy.
"We think exports will remain under pressure over the coming quarters if, as we expect, global GDP growth slows," Tandon said.
Therefore, Capital Economics maintains its 5.5 percent growth forecast for the Philippines in 2025, which is below consensus expectations.