INCOME AND EXPENDITURE:

PHILIPPINES
Euromonitor International
May 2017
INCOME AND EXPENDITURE: PHILIPPINES Passport I

LIST OF CONTENTS AND TABLES

Chart 1 SWOT Analysis: Philippines ......................................................................... 1
Gross Income by Age ................................................................................................................... 1
Individuals Aged 30-34 Command the Highest Average Gross Income Levels ........................ 1
Chart 2 Case Study on Gross Income by Age: The Philippines ................................ 2
Chart 3 Gross Income Distribution in the Philippines ................................................ 2
Social Class Composition ............................................................................................................. 3
Social Class C Is Set To Remain As the Country’s Fastest Growing........................................ 3
Chart 4 Case Study on Social Class Composition: The Philippines .......................... 3
Chart 5 Overview of the Philippines’ Social Classes ................................................. 3
Household Income Distribution ..................................................................................................... 4
Income Distribution Remains Highly Unequal ........................................................................... 4
Chart 6 Household Income Distribution in the Philippines ........................................ 4
Consumer Expenditure by Category ............................................................................................ 5
Hotels and Catering Is Expected To Show the Best Performance in the Long Term ................ 5
Chart 7 Consumer Spending in the Philippines......................................................... 6
Consumer Expenditure by Region ................................................................................................ 6
the National Capital Is the Country’s Most Important Consumer Market .................................. 6
Chart 8 Philippines’ Consumer Market by Region..................................................... 7
Consumer Expenditure by Income ............................................................................................... 7
Rich Households Set To Enjoy the Biggest Rise in Discretionary Spending Capacity ............. 7
Chart 9 Consumer Spending by Income Type in the Philippines .............................. 8
Consumer Expenditure by Household Type ................................................................................. 8
Single-person Households Will Be the Fastest-growing Market ............................................... 8
Chart 10 Spending by Household Type in the Philippines .......................................... 9
Regional Comparison ................................................................................................................... 9
Chart 11 The Philippines versus Selected Asia Pacific Economies ............................ 9

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INCOME AND EXPENDITURE:

PHILIPPINES
The growth rate of the Philippines’ per capita disposable income and expenditure was higher
than Asia Pacific averages over 2011-2016. Nevertheless, the discretionary spending capacity
of Filipino households remains limited, while income inequality is still relatively high by global
standards. Rising income levels and a growing middle class are expected to keep generating
opportunities in the Filipino consumer market over the long term, although external risks have
increased.

Chart 1 SWOT Analysis: Philippines

Source: Euromonitor International

GROSS INCOME BY AGE

Individuals Aged 30-34 Command the Highest Average Gross Income

Levels
The country’s young demographic profile is reflected in the distribution of gross income:
 Filipinos aged 35-39 account for the largest share of individuals in the top income band (ie
those with an annual gross income over US$150,000). This situation is expected to persist
through to 2030, which will keep generating demand for family-related goods and services in
categories like education, transport, and household goods and services, targeted at the high-
end segment;
 The largest concentration of total gross income is observed in the age group 15-29 (due to the
country’s predominantly young population), representing a large market for clothing and
footwear, food and non-alcoholic beverages, and technological goods;

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 Price remains the main factor influencing purchasing patterns of most Filipino consumers,
although quality and brand are gaining importance in households’ buying decisions, due to
the long-term increase in the country’s disposable income levels.

Chart 2 Case Study on Gross Income by Age: The Philippines

Source: Euromonitor International

Chart 3 Gross Income Distribution in the Philippines

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Source: Euromonitor International from national statistics

Note: Data for 2017-2030 are forecasts

SOCIAL CLASS COMPOSITION

Social Class C Is Set To Remain As the Country’s Fastest Growing

Social class E (the lowest-income class) is the largest in the Philippines, representing a large
market for low-cost food and non-alcoholic beverages, and housing:
 However, social class C (the middle class) recorded the strongest rate of expansion over
2011-2016, as increasing income levels allowed a portion of poor households to access the
middle class;
 Over the period of 2017-2030, social class C is anticipated to remain as the country’s fastest
growing, backing demand for products in categories like transport, clothing and footwear, and
hotels and catering.

Chart 4 Case Study on Social Class Composition: The Philippines

Source: Euromonitor International

Chart 5 Overview of the Philippines’ Social Classes

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Source: Euromonitor International from national statistics

Note: Data for 2017-2030 are forecasts

HOUSEHOLD INCOME DISTRIBUTION

Income Distribution Remains Highly Unequal

The Philippines’ income gap is relatively wide by both regional and global standards, due to
the concentration of productive means in a reduced number of powerful political families:
 Nevertheless, income inequality in the Philippines recorded a modest decline between 2011
and 2016, on the back of the country’s economic expansion over this timeframe;
 During the period of 2017-2030, income inequality in the country is forecast to experience a
slight gradual decrease, supporting growth of the Filipino middle class over the long term.

Chart 6 Household Income Distribution in the Philippines

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Source: Euromonitor International from national statistics

Note: Data for 2017-2030 are forecasts. Data are in constant US$

CONSUMER EXPENDITURE BY CATEGORY

Hotels and Catering Is Expected To Show the Best Performance in the

Long Term
The share of essential spending of Filipino households is high by global standards, principally
as a result of the country’s elevated food costs (due to infrastructure bottlenecks, low
agricultural productivity, and high energy costs):
 However, the share of essential spending in the Philippines is anticipated to fall gradually over
the long run, as increasing levels of disposable income allow Filipino households to allocate
more resources to discretionary spending;
 After a slowdown observed during the first half of the 2010s, real growth of the Filipino
consumer market is expected to pick up through to 2030, in line with the expected robust
performance of the Philippines’ economy over this period;
 Nevertheless, there are considerable downside risks to this base scenario, deriving from
potential external shocks to the Filipino economy;

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 Hotels and catering is forecast to be the best-performing category in the Filipino consumer
market during the period of 2017-2030, supported by rising demand from the growing Filipino
middle class over the long run.

Chart 7 Consumer Spending in the Philippines

Source: Euromonitor International from national statistics/UN/OECD

Note: Data for 2017-2030 are forecasts

CONSUMER EXPENDITURE BY REGION

the National Capital Is the Country’s Most Important Consumer Market

The National Capital region (or Metropolitan Manila) accounts for the largest share of total
consumer expenditure in the Philippines:

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 The size of the National Capital consumer market is the result both of the region’s sizeable
population and of its relatively large levels of per household consumer spending (the highest
in the country);
 The fastest-growing consumer markets in the Philippines over the period of 2017-2030 are
forecast to be Soccsksargen and Northern Mindanao, on the back of the expected strong
economic performance of the resource-rich Mindanao island group over this timeframe.

Chart 8 Philippines’ Consumer Market by Region

Source: Euromonitor International from national statistics/UN/OECD

Note: Data for 2017-2030 are forecasts

CONSUMER EXPENDITURE BY INCOME

Rich Households Set To Enjoy the Biggest Rise in Discretionary

Spending Capacity
Filipino households in decile 1 have to channel over three-quarters of their spending to cover
basic necessities:
 The country’s most discretionary spending categories are hotels and catering, and leisure and
recreation. On the other hand, food and non-alcoholic beverages, and alcoholic beverages
and tobacco are the least discretionary (ie those to which deciles 1, 5 and 10 allocate a
broadly similar share of their spending);

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 Over 2017-2030, decile 10 is anticipated to record the strongest rise in discretionary spending
levels (due to expected faster income growth compared to other deciles), which will support
demand for the aforementioned most discretionary spending categories in the long run.

Chart 9 Consumer Spending by Income Type in the Philippines

Source: Euromonitor International from national statistical offices/OECD

CONSUMER EXPENDITURE BY HOUSEHOLD TYPE

Single-person Households Will Be the Fastest-growing Market

Couples with children are the largest consumer market across household types, accounting
for about three-fifths of total consumer spending in 2016:

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 However, factors like changing lifestyles of Filipino youth; increasing disposable incomes; and
rising tertiary education enrolment rates are leading to the fast increase of the single-person
household format;
 This fast-growing household type is expected to drive demand for goods and services in
categories like communications, leisure and recreation, and hotels and catering over the long
term.

Chart 10 Spending by Household Type in the Philippines

Source: Euromonitor International from national statistical offices/OECD

REGIONAL COMPARISON
Chart 11 The Philippines versus Selected Asia Pacific Economies

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Source: Euromonitor International from national statistics

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