Balisacan sees gradual recovery in household consumption

KUALA LUMPUR, PHILIPPINES, 1 SEPTEMBER 2026 —

Malaysia’s Household Spending Outlook Shaped by Inflation, Infrastructure Push

“You don’t expect a major reversal. It will be slow, but as long as we see it is improving, I feel that’s good,” Balisacan said in a mix of English and Filipino. He expressed optimism that consumption will rebound after a weak second quarter, which saw Philippine gross domestic product (GDP) expand by just 2.3%—a new post-pandemic low.

Household final consumption expenditure, a key driver of the economy, grew by 2.8% in the second quarter, the weakest pace since the 4.8% contraction recorded in the first quarter of 2021. This marked the fifth consecutive quarter of decelerating growth, reflecting broader economic headwinds.

Inflation remains a major constraint on household spending, despite easing slightly to 6.2% in July from 6.4% in June. The figure remains above the Bangko Sentral ng Pilipinas’ (BSP) 3% target, with inflation averaging 5% in the first seven months of 2026—higher than the 1.7% recorded in the same period last year.

Balisacan highlighted that a recovery in public infrastructure spending could support consumption by stimulating private sector activity, particularly in construction. “When public infrastructure projects are underway, it influences private sector construction, so it generates multiplier effects across the country,” he said.

Public construction spending plunged by 32.4% in the second quarter, as agencies remained cautious following last year’s flood control corruption scandal. Balisacan also noted that consumer and business sentiment continues to be weighed down by the scandal, which has eroded confidence in governance.

“Hopefully, we can get inflation to decline and Congress will deliver the legislation that could help improve the perception about our governance,” he said.

Analysts anticipate a gradual pickup in household consumption in the second half, though growth is expected to remain muted. Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., forecasts consumption to stay positive but subdued in the third quarter before strengthening in the fourth.

“The ‘ber’ months should provide the usual seasonal lift from holiday spending, remittances, bonuses and greater discretionary activity, but consumers are likely to remain more selective than in previous cycles,” Arce said. He added that easing food inflation could improve household purchasing power, though consumers are expected to remain price-sensitive due to elevated costs.

“The fourth quarter should be stronger than the third, but I would describe the outlook as a normalization in consumption rather than a consumption boom,” Arce said.

Juan Paolo E. Colet, managing director at China Bank Capital Corp., struck a more cautious tone, suggesting that household consumption could remain weaker than a year earlier even if it improves from the second quarter. “The consumer is under pressure from elevated prices, slow growth, high interest rates and natural calamities,” he said.

Colet noted that a breakthrough in Middle East peace efforts could ease inflationary pressures and improve consumer sentiment, though he acknowledged such a development appears unlikely in the near term.

Beyond short-term consumption trends, BSP Governor Eli M. Remolona, Jr. has raised concerns over the Philippines’ low savings rate, which he linked to the country’s persistent current account deficit. “The current account has been in the negative for a long time. As much as possible, we hope savings will increase because that is the long-term solution,” Remolona told a Senate budget briefing.

Domestic investment currently exceeds national savings, requiring the country to rely on foreign financing. In the first quarter of 2026, the current account deficit widened to $5.66 billion, equivalent to 4.8% of GDP, up from $4.2 billion (3.7% of GDP) a year earlier. The central bank projects the deficit to reach $18 billion, or 3.6% of GDP, by 2026.

Jose Enrique “Sonny” A. Africa, executive director of think tank IBON Foundation, challenged Remolona’s assessment, arguing that low household savings reflect inadequate incomes rather than excessive consumption. “Millions of Filipinos consume all their earnings and don’t save because their incomes are so low that they don’t have anything left to save,” he said in a Facebook post.

Africa urged the BSP to prioritize affordable financing for farmers, fisherfolk, and micro, small and medium enterprises (MSMEs), while supporting accessible public services, infrastructure, and utilities.

As Malaysia monitors regional economic trends, the Philippines’ gradual consumption recovery could have implications for trade and investment flows, particularly in sectors tied to consumer goods and construction.