MANILA, Philippines – Filipino households are stepping into the holiday season with less doom and gloom about their finances, though optimism still feels like a distant dream.

The Bangko Sentral ng Pilipinas (BSP) reports that the consumer confidence index (CI) for Q4 2024 improved to -11.1%, up from -15.6% in the previous quarter. It’s still negative — meaning there are more pessimistic consumers than optimistic ones — but the gap is narrowing.

To put this in perspective, the CI hit a historic low of -54.5% in Q3 2020 during the height of the pandemic and has been climbing since. However, it has yet to recover to the pre-pandemic levels of late 2019 and early 2020, when optimism was the norm.

This “less negative” sentiment stems from expectations of higher incomes, more job opportunities, and additional sources of income according to the BSP’s survey. TransUnion’s latest Consumer Pulse Study echoes this, with 44% of Filipinos reporting income gains and another 40% saying their income has held steady.

But inflation continues to loom large. BSP data show consumers expect inflation to hover around 6.2% over the next 12 months — well above the government’s 2% to 4% target. Households are particularly concerned about rising food prices, utility bills, and limited supplies of goods. TransUnion’s study also points to similar concerns, with 80% of Filipinos listing inflation as their top concern for the months ahead, followed by job security and rising interest rates.

Savings dry up, credit usage rises

Filpinos have also been saving less. According to the BSP, only 25.6% of households reported having savings in Q4 2024, down from 29% in the previous quarter — the lowest level in over three years. Those who can save are setting aside funds for emergencies, health expenses, education, and retirement.

As savings dwindle, Filipinos seem to be relying more on credit, even as they worry about higher interest rates. TransUnion observed that 17% of Filipinos increased their credit usage during the holiday season. At the same time, the BSP noted that consumers are bracing for higher borrowing costs, anticipating rising interest rates across all reference points.

For many, this reliance on credit may be necessary, but it also comes with challenges. TransUnion found that 42% of respondents struggled to pay bills and loans in full, a figure that hasn’t improved from last year.

“In the face of sustained financial pressure, consumers in the Philippines have increasingly adjusted spending and saving behaviors,” said Weihan Sun, principal of research and consulting for Asia Pacific at TransUnion. “These behaviors reflect a tendency to prioritize immediate financial flexibility over long-term security as households attempt to bridge short-term financial needs in a high-cost environment.”

Sun cautioned that this could “elevate default risks” among consumers and also emphasized the need for credit education, especially as many Filipinos are still relatively new to credit. (READ: [Finterest] Gen Z wants credit but can’t get it. Banks need to step up their game.)

Given the challenging economic environment, big-ticket purchases like homes, cars, and appliances also remained firmly out of reach for most. The BSP noted that the confidence index for these pricey items improved only slightly from -68.9% in Q3 to -67.3% in Q4.

Still, Filipino households are showing some signs of resilience as they look to the year ahead. The central bank noted that consumer confidence for Q1 2025 and the next 12 months has improved, buoyed by expectations of higher income, additional sources of earnings, and more job opportunities.

Meanwhile, TransUnion found that 89% of Filipinos also expect their income to grow in 2025. Whether this optimism translates into stronger spending or more cautious saving behaviors in the coming months remains to be seen. – Rappler.com

Finterest is Rappler’s series that demystifies the world of money and gives practical advice on managing your personal finances.