Filipino consumers are falling behind their Asian neighbors in bouncing back from the Covid-19 pandemic as low-paying jobs, shrinking savings, and slowing remittances hit household spending.

According to a report by Dutch bank ING, while shoppers in India and Japan have resumed pre-pandemic spending habits, the Philippines and other Southeast Asian nations face a much slower recovery due to weaker financial buffers and rising inflation risks.

“Asia’s consumer is showing signs of recovery. But it remains uneven rather than broad-based, with increasing differentiation across the region,” Deepali Bhargava, ING’s regional head of research for Asia-Pacific, wrote in a June 30 note.

Bhargava said Asian economies, including Japan, Australia, and India, are benefiting from stronger consumption growth, noting that spending activity in these countries has returned to pre-pandemic levels.

“By contrast, consumption recoveries in the Philippines, Thailand, Indonesia, and Malaysia continue to lag,” Bhargava said.

ING further pointed out the growing divide between regional “outperformers” and struggling Southeast Asian economies. Singapore stands out with “still-healthy household balance sheets” and a recovery in discretionary spending.

Meanwhile, the Philippines and Indonesia face “thin” precautionary savings. This lack of a fiscal cushion leaves Filipino consumers “more sensitive to income shocks and inflation” compared to their wealthier neighbors.

Structural issues in the labor market are further hampering the Philippines’ recovery. Bhargava noted that between 2010 and 2025, three out of every four new jobs in the country were created in low-productivity, non-tradable sectors.

“This shift away from higher-productivity, export-oriented sectors toward lower value-added activities poses a structural constraint on income growth and, by extension, on the sustainability of consumption," Bhargava warned.

A notable slowdown in income flows from external sources exacerbates these internal struggles. Unlike other regional economies, Philippine consumption is “closely tied” to overseas remittances, which are now showing signs of fatigue.

Overseas remittance growth slowed to about 2% year-on-year in April, with inflows dropping to a near one-year low of $2.7 billion. “This marks the weakest annual growth in nearly four years," ING noted.

ING’s outlook is further clouded by unpredictable geopolitical developments. Because the Middle East accounts for nearly a fifth of total remittance inflows, escalating tensions in that region risk choking cash inflows and potentially dragging down economic growth.