ACCORDING to the Asian Development Bank, the Philippine economy is expected to pick up in 2024. The forecast for the 2024 gross domestic product (GDP) is maintained at 6.2 percent with household consumption and public spending on infrastructure and social services contributing to the country’s economic expansion.
Regarding inflation, the report forecasted some relief in the new year at an average of 4.0 percent. The country’s inflation in November reported by the Philippine Statistics Authority was 4.1 percent, down slightly from 4.9 percent in October. However, various external forces such as the possible El Niño dry spell and pressures from elevated global commodity prices could slow the pace of how inflation eases in the coming year.
Filipinos are getting ahead of financial uncertainties
DESPITE a relatively positive economic outlook for 2024, Filipinos are already taking steps to build their economic resilience. In the latest Consumer Pulse Study (CPS) by Transunion Information Solutions Inc. (TransUnion PHL), most Filipinos (80 percent) are expecting their income to increase in the next 12 months. However, despite the prospects of improvements in their personal finances, over half (51 percent) are putting money into their emergency funds, while over a third (34 percent) are accelerating their debt repayments.
I find this contrast between expectation and reality to be very interesting. Coming off a boom in revenge spending with the ease of pandemic-related restrictions on everyday activities, economics forecasted that Filipinos would eventually return to saving.
Additional data from the CPS Q4 study seems to support their forecast. Aligned with saving, Filipinos are looking to cut on forms of non-essential spending such as cars and appliances (44 percent) and even digital services (21 percent).
The impact of saving
WITH Filipinos choosing to save more, I see this proactive approach to be an encouraging sign that our countrymen are looking to take better control of their finances. By building up higher savings reserves, people have a better cushion to help absorb rising expenses.
In a larger scale, an individual’s ability to cope with financial hardships can help the country power through times of uncertainty. After all, when bills are being paid, essential services such as banks and groceries can stay in business and keep their workers employed.
A declining perception of credit
THIS preference for saving could be a possible factor for why fewer Filipinos see the importance of credit in achieving their financial goals.
Additional CPS data also revealed that 59 percent of Filipinos who considered applying for credit or refinancing existing credit ultimately decided against it. Asked on the reasons that lead to their decision, most cited the high cost of borrowing money (39 percent), others found alternative funding sources (32 percent), while some mentioned their income or employment status (29 percent).
These findings show existing challenges prevent more Filipinos from enjoying the benefits of greater financial inclusion. For institutions within the formal financial sector, here lies an opportunity to help Filipinos build greater financial resilience by educating them on credit and expanding access to the products they need.
The path to financial resilience
FINANCIAL resilience is the ability to withstand planned or unplanned life events that significantly impact one’s income or assets. Certainly, saving money is one important way for people to become financially resilient. However, the path to financial resilience isn’t a singular one.
Prudent financial management encompasses several key aspects to ensure the stability, growth, and protection of one’s financial resources. These methods include both savings and responsible credit management.
In cases where an emergency fund may not be enough to withstand an unexpected expense, having good credit can help support people through any tough times that come their way. To that end, it is crucial for the formal financial sector to emphasize the importance of financial inclusion.
Consumer credit education must continue to do away with the perception that credit access only enables non-essential spending. Instead, credit access is an important tool to help boost one’s financial resilience. In whatever shape the country’s economy takes in 2024, with good savings and good credit working together, more Filipinos will be in better shape to handle whatever comes their way.
Pia Arellano is the president and CEO of Transunion Information Solutions Inc. (TransUnion PHL). She has over 28 years of industry experience across banking, payment solutions, telecommunications, and remittance services. The views and opinions expressed herein are those of the author and do not necessarily represent the BusinessMirror. Email questions to email@example.com.