An optimistic land of opportunity with strong fundamentals and buoyant confidence from consumers to spend on lifestyle.
The Philippines is set to gain a lot from the impending ASEAN 2015 integration and as a result global and Asian multinationals alike are turning to this fast-growing market as a key source of growth.
The country’s economic fundamentals are sound, with the International Monetary Fund forecasting 6.7 per cent GDP growth in 2015, up from 6.1 per cent in 2014. Meanwhile, the key drivers of the Philippines’ growth in the past year—the private construction sector, increases in Overseas Filipino Workers remittances, the growing business process outsourcing industry and strong consumption spending—are set to continue in the short to medium term.
The positive economic outlook for the Philippines is having a flow-on effect to consumer confidence, particularly confidence in job prospects and personal finances, with Filipino confidence levels ranking third globally behind India and Indonesia according to Nielsen’s first quarter 2015 Global Consumer Confidence Index. Thanks to continued buoyant consumer confidence, consumer spending is strengthening, including discretionary spending on lifestyle and premium items, and retail spending metrics from the Philippine Government show a hike in spending in areas such as health (up 9.1 per cent), alcohol (up 8.7 per cent), recreation (up 7.7 per cent), and clothing and footwear (up 6 per cent). Meanwhile, numbers from The Chamber of Automotive Manufacturers of the Philippines and the Truck Manufacturers Association show year-on-year automotive sales growth hit 30 per cent in 2014. The passenger-car segment, which expanded 48 per cent, was the main driver for the uplift.
Outlook for the construction and real-estate sector also remains strong after posting double digit growth in 2014, while the retail sector is gearing up for growth with a number of large firms eyeing expansion opportunities. Most of the major retailers have launched different store formats such as hypermarkets, small stores, convenience stores and drugstores in a bid to bring their stores closer to the consumer’s home and tap into increasing demand for one-stop shopping and convenience.
As demand for premium products and items, which offer convenience continues to expand, consumers are also moving away from home-prepared meals toward ready-to-eat food, and according to Nielsen’s 2015 Shopper Trends report almost eight in 10 consumers have eaten at least once a month in a quick service restaurant. Likewise, the volume of purchases made in convenience stores and bakeries is increasing.
With the prospects of a growing economy and an optimistic 2015, Filipino consumers are spending more on products and services that will improve their lives. While majority of the population remains in the lower-income segment, the middle class is slowly growing, particularly among families receiving monthly remittances from Overseas Filipino Workers, as well as BPO employees who receive a higher than average income, all of which represents opportunities for companies looking to expand their foothold in the Philippines.