Philippine Markets Newsletter

MONDAY MACRO: Philippines disposable income bolsters economic growth, while increased savings keep consumers cautious for now

July 17, 2023

After experiencing a two-year decline, Philippines gross savings finally rebounded and achieved positive growth levels in 2022. This was driven by non-financial corporations contributing the highest gross saving.

While the country witnessed some growth in gross national disposable income, it was the weakest rate in the past decade. Until 2022, the Philippines wouldn’t see the highest growth rate in the last 10 years in disposable income and gross savings.

In this article, we’ll explore how this surge in growth rates will benefit the Philippine economy.

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Income can be either saved or spent, and decisions regarding savings are closely connected to spending choices.

Consumers tend to save more during inflationary periods when their spending power is lower. So at the current 6% levels of interest rate, we expect to see a higher savings rate.

In 2022, Philippine Gross National Disposable Income reaching a decade-high of PHP 24.93 trillion. The country’s total gross saving amounted to PHP 4.90 trillion, both recording the highest growth rates in the past decade. Gross savings rate grew by 26.6%, outpacing the 15.9% growth in gross national disposable income that same year.

While the higher savings rate indicates more cautious consumer spending, the higher income points to a more positive state of the Philippine economy going forward. With the reopening of the economy, businesses are once again earning and unemployment rate is even lower than pre-pandemic levels.

Additionally, the expected decrease in the inflation rate for 2023 is anticipated to contribute to higher disposable income. This may further stimulate discretionary spending, giving consumers greater purchasing power.

The implications of this economic progress are significant, as the Philippines is poised to experience a robust multiplier effect. Given that consumer spending accounts for approximately two-thirds of the Philippine economy, positive economic expansion is anticipated in the coming quarters

The increased consumer spending drives higher demand for goods and services, thereby stimulating businesses to ramp up production, expand their workforce, and invest in growth opportunities.

In addition, this surge in financial resources also empowers households to allocate a higher portion towards investments in financial instruments, real estate, and entrepreneurial activities. As a result, the channeling of funds into various sectors of the economy will contribute to the overall economic development.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful.

Stay tuned for next week’s Monday Macro report!


Angelica Lim
Research Director
Philippine Markets Newsletter
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