BMI, a unit of Fitch Solutions, has trimmed its 2026 Philippine household spending growth forecast to 4.4% from 4.5%, as surging inflation and elevated oil prices from the Middle East conflict erode purchasing power across the archipelago.
The downgrade follows a punishing stretch for Filipino households. Consumer prices rose 7.2% in April from a year earlier, the fastest pace since March 2023 and well above the Bangko Sentral ng Pilipinas’ (BSP) forecast range of 5.6% to 6.4%, as well as its 2% to 4% target band. Transport costs surged 21.4% year-on-year, while food and non-alcoholic beverage inflation more than doubled to 6.0% from 2.9% in March, according to the Philippine Statistics Authority. On a monthly basis, the consumer price index climbed 2.6%, the largest increase since January 1996.
First-quarter GDP data released last week offered little relief. The economy expanded just 2.8%, below the 3.5% consensus, while household final consumption expenditure grew only 3.0%, the weakest pace outside the pandemic period, per the Philippine Statistics Authority. BMI highlighted higher debt-servicing costs and sticky food inflation as key drags on discretionary spending.
Inflation Shock Squeezes Consumers
Nomura Securities joined the downgrade wave, cutting its 2026 GDP growth forecast to 4.6% from 5.0%, citing the weak Q1 data and ongoing Middle East fallout. The Japanese investment bank flagged a 60% probability of further BSP rate hikes this year.
The BSP already raised rates by 25 basis points to 4.5% in April, its first increase in two and a half years, and revised its full-year inflation forecast to 6.3%. HSBC warns the policy rate could hit 6% if the conflict drags on, with consumer inflation potentially reaching 8.1% in Q4.
A Narrowing Path for Growth
The Philippines now faces a tough balancing act. Overseas remittances and a tight labor market offer some buffer, but BMI cautioned that “elevated sticky inflation, lower remittances, and high debt levels” pose major risks. With inflation far above target and monetary tightening accelerating, the room for consumer-led growth, the economy’s traditional engine, is closing rapidly.
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