The Philippines is among the few Asian economies where workers have posted relatively strong wage gains during the artificial intelligence (AI)-driven export boom, but those gains are unlikely to be sustained without a broader manufacturing recovery, according to think tank Oxford Economics.

In a report last Tuesday, July 21, Oxford Economics lead economist Alexandra Hermann Prasad said the region’s booming electronics exports have failed to translate into a comparable rise in household spending, as the benefits of the AI boom have remained concentrated among businesses rather than consumers.

“The Philippines is among the few apparent exceptions, although this shouldn’t be overstated. Manufacturing growth there has been among the weakest in the region, and wage gains have been driven largely by one-off minimum wage increases,” according to Oxford Economics.

“As such, recent wage growth is unlikely to prove durable without a stronger, broad-based manufacturing recovery,” the think tank said.

The report also noted that Filipino households have become more cautious with their finances after the Covid-19 pandemic.

“What’s more, after spending beyond their disposable income during the post-pandemic recovery, Filipino households have used part of their recent income gains to rebuild financial buffers,” Oxford Economics said.

The think tank said Asia has been the biggest beneficiary of the AI boom over the past two years, with electronics exports surging alongside strong demand from the United States. However, consumer spending across much of the region has failed to accelerate at the same pace.

According to the report, AI-related manufacturing employs only a small share of workers, has generated little additional hiring, while real manufacturing wage growth has generally lagged manufacturing output growth. At the same time, relatively low household stock ownership has limited the wealth gains that could have supported consumption.

Oxford Economics said these factors explain why stronger exports have produced only limited spillovers to household incomes despite robust manufacturing activity in several Asian economies.

The think tank expects exports to continue supporting economic growth across Asia, but said they are unlikely to offset subdued consumer sentiment and the squeeze on real household incomes from higher inflation.

For the Philippines, the report said a rebound in public investment and recovering remittance inflows should continue to support household spending.

However, it warned that elevated inflation—among the highest in the region—will likely keep the near-term Philippine consumption outlook subdued.

“Overall, our consumption outlook for the region remains muted,” the report said.

“The AI export boom hasn’t translated into sufficiently broad-based household income gains to offset the squeeze on real incomes from higher energy prices following the Middle East conflict.”

Oxford Economics added that AI-driven manufacturing differs from previous export booms because production is far more capital-intensive and less labor-intensive, allowing firms to meet rising demand primarily through capital investment and productivity gains rather than large-scale hiring.

As a result, the report said the gains from the AI boom have accrued disproportionately to capital rather than labor, limiting the benefits for households and constraining consumer spending despite strong export performance.