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INCOME AND EXPENDITURE:

PHILIPPINES
Euromonitor International
March 2015

INCOME AND EXPENDITURE: PHILIPPINES

LIST OF CONTENTS AND TABLES


Chart 1
Chart 2

SWOT Analysis: Philippines ......................................................................... 1


Overview of Income and Consumer Expenditure in the Philippines:
2014 ............................................................................................................. 1

Gross Income by Age ................................................................................................................... 2


Growth in Per Capita Annual Gross Income To Accelerate in the Medium and Long Term ..... 2
Chart 3
Chart 4

Top Gross Income Band (US$150,000+) by Age: 2014 and 2030 ............... 3
Total Gross Income: 2014 ............................................................................ 3

Social Class Composition ............................................................................................................. 4


Low-income Earners Are the Majority ....................................................................................... 4
Chart 5

Age Composition of Social Classes ABCDE: 2014 ...................................... 5

Household Income Distribution ..................................................................................................... 5


High Level of Income Inequality ................................................................................................ 5
Chart 6
Chart 7

Average Household Annual Disposable Income by Decile: 2014 and


2030 ............................................................................................................. 6
Household Income Distribution: 2014........................................................... 6

Consumer Expenditure by Category ............................................................................................ 7


Education Spending Will Grow the Fastest ............................................................................... 7
Chart 8
Chart 9

Real Growth Indices of Fastest Growing Consumer Spending


Categories: 2015-2030................................................................................. 8
Real Growth Indices of Slowest Growing Consumer Spending
Categories: 2015-2030................................................................................. 9

Consumer Expenditure by Region ................................................................................................ 9


National Capital Region Has the Highest Purchasing Power .................................................... 9
Chart 10
Chart 11

Total Consumer Expenditure by Region: 2014 ............................................. 9


Per Household Consumer Expenditure by Region: 2014 ........................... 10

Consumer Expenditure by Income Level .................................................................................... 11


Stark Differences in Spending Pattern Across Income Levels ................................................ 11
Chart 12
Chart 13

Spending Patterns of Deciles 1, 5 and 10: 2014 ........................................ 12


Category Expenditure by Each Decile as a Proportion of Total
Category Spending: 2014 .......................................................................... 12

Definitions................................................................................................................................... 13
Deciles .................................................................................................................................... 13
Discretionary Spending........................................................................................................... 13
Disposable Income ................................................................................................................. 13
Gross Income ......................................................................................................................... 13
Mean Income .......................................................................................................................... 13
Median Income ....................................................................................................................... 14
Middle Class ........................................................................................................................... 14
Non-discretionary Spending ................................................................................................... 14
Social Class A ........................................................................................................................ 14
Social Class B ........................................................................................................................ 14
Social Class C ........................................................................................................................ 14
Social Class D ........................................................................................................................ 14

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INCOME AND EXPENDITURE: PHILIPPINES

Social Class E ........................................................................................................................ 14

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INCOME AND EXPENDITURE:


PHILIPPINES
Growth in consumer income and expenditure in the Philippines is expected to accelerate in
the medium and long term, backed by the countrys stable economic growth, youthful population
and rising middle class. However, income inequality and poverty remain relatively high, resulting
in stark divergence in spending patterns and hindering the markets growth potential. Spending
on education is set to grow the fastest in the coming years, driven by rising demand for private
and higher education.
Chart 1

Source:

Chart 2

SWOT Analysis: Philippines

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Overview of Income and Consumer Expenditure in the Philippines: 2014

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Source:

Euromonitor International from national statistics

GROSS INCOME BY AGE


Growth in Per Capita Annual Gross Income To Accelerate in the Medium
and Long Term
The Philippines per capita annual gross income stood at PHP105,044 (US$2,366) in 2014,
growing at an average annual rate of 3.2% in real terms since 2009. Real growth of the
Philippines annual per capita gross income was below the Asia Pacific average of 4.2% during
the same period, mainly due to the countrys sharp economic slowdown in 2009 amidst the
global financial crisis of 2008-2009.
Over the forecast period of 2015-2030, the Philippines per capita annual gross income is
expected to expand faster, rising by an average of 4.2% per annum in real terms. This will be
backed by the countrys stable and robust economic growth that is forecast for the period, driven
by strong domestic demand and higher investments. The Philippines annual real GDP is
estimated to expand by an average rate of 6.0% per year between 2015 and 2030, compared to
the 6.3% recorded during the 2009-2014 period.
The age group 35-39 is the most prominent amongst the countrys top income earners:
In 2014, those aged 35-39 accounted for the largest share of the most affluent income
earners (those with an annual gross income of US$150,000+ in constant terms), at 19.6%,
followed by the age group 30-34 which represented 19.2% of the highest income earners.
These profiles typically correspond to business owners and/or well-educated professionals
holding top positions in the Philippines private sector;

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By 2030, the age bands of 35-39 and 30-34 will still account for the largest share of the
Philippines top income earners, at 19.6% and 19.3% respectively. This will be driven by the
countrys economic growth and an expansion of the private sector, which will continue
creating attractive business and employment opportunities for the population during the 20152030 period. The age group 65+, however, will witness the largest gain in the share of the
highest income earners in the Philippines, from 0.9% in 2015 to 1.4% by 2030. This reflects a
gradual rise in the ageing trend of the Filipino population.
Chart 3

Source:
Note:

Top Gross Income Band (US$150,000+) by Age: 2014 and 2030

Euromonitor International from national statistics


Data for 2030 are forecasts.

The Philippines youthful population is a key determinant of the countrys distribution of total
gross income:
In 2014, the highest concentration of total gross income in the Philippines was witnessed in
the age band 15-39, illustrated by the large hot spot on the map below. Although the typical
average gross income of this age segment is relatively low (ranging between US$670 and
US$4,700), the large number of individuals in this age group results in a high concentration of
income for this age segment. In 2014, Filipinos aged 15-29 represented 28.0% of the
countrys total population.
Chart 4

Total Gross Income: 2014

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Source:
Note:

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The horizontal axis depicts the age of individuals and the vertical axis the distribution of per capita
income by annual gross income brackets. The shading refers to the total income in thousand US$. The
closer to red, the larger the amount of total income in that age and income range.

SOCIAL CLASS COMPOSITION


Low-income Earners Are the Majority
The Philippines social class distribution is uneven as a result of the countrys high level of
income inequality:
Social class E (low-income earners) is the largest in the Philippines, representing 42.0% of
the countrys population aged 15+ in 2014. This is largely similar to regional peers, such as
Vietnam where social class E accounted for 39.4% of the population aged 15+ in the same
year. As the Philippines consumer market is dominated by low-income earners, marketers of
basic, value-for-money products and services will find the most opportunities in the country;
Between 2009 and 2014, the share of social class E out of the Philippines population aged
15+ declined from 43.5% to 42.0%. This has been driven by the countrys economic growth
and improved employment situation, which resulted in higher income for low-income earners
and allowed a portion of individuals in social class E to make the transition towards higher
social classes;
In 2014, most Filipinos in social class E belonged to the age group 15-19, owing to the
countrys mainly young population and higher unemployment rates for the youth;

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Social class E is expected to remain as the dominant social class in the Philippines by 2030,
representing 40.7% of the countrys population aged 15+ by that year. The age group 15-19
will continue to be most representative in social class E by 2030, driving demand for basic,
budget necessities, such as food and clothing.
Chart 5

Source:

Age Composition of Social Classes ABCDE: 2014

Euromonitor International from national statistics

HOUSEHOLD INCOME DISTRIBUTION


High Level of Income Inequality
Growth in household income levels in the Philippines are expected to accelerate in the
medium and long term:
During the 2009-2014 period, per household annual disposable income in the Philippines
increased on average by 2.2% per year in real terms to reach PHP420,946 (US$9,481) by
2014. The overall increase during the period was 11.7%, backed by the countrys strong
economic recovery since 2010;
For the forecast period of 2015-2030, growth in the Philippines annual disposable income per
household is estimated to accelerate to 3.6% in real terms on average per year to achieve an
overall real increase of 68.9% over the period. The Filipino economy is expected to perform
well in the medium and long term, driven by higher spending on infrastructure and growing
domestic demand.
Income inequality levels in the Philippines remain relatively high, despite some improvements
since 2009:
The richest 10.0% of households (decile 10) in the Philippines accounted for 33.1% of the
countrys total annual disposable income in 2014, compared to the poorest 10.0% of
households (decile 1) that received 1.3% of total annual disposable income;

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During the 2009-2014 period, the share of total annual disposable income of decile 10
declined from 34.9% to 33.1%, while that of decile 1 dropped slightly from 1.4% to 1.3%. The
share of wealthy households income fell more significantly during the period since
uncertainties in the domestic and global economies have affected their earnings, which often
consist of bonuses, business profits and returns on financial instruments;
Reducing poverty and inequalities continue to be among the Filipino governments priorities.
The government has implemented a cash transfer programme called Pantawid Pamilya
(Family Subsistence) since 2007, whereby poor households will obtain monthly small grants
from the government, if they keep their children in school and take them regularly to health
centres. According to the Philippines Statistics Authority, 25.8% of the Filipino population still
lived below the national poverty line as of 2014;
The Philippines Gini index a measure of income inequality ranking between zero (perfectly
equal) and 100 (perfectly unequal) improved from 46.4% in 2009 to 45.3% in 2014. By
2030, the Philippines Gini index is forecast to decline further to 44.1%, reflecting a constant
improvement in the income distribution pattern.
Chart 6

Source:
Note:

Average Household Annual Disposable Income by Decile: 2014 and 2030

Euromonitor International from national statistics


Data for 2030 are forecasts. Data are in constant US$.

More than six out of 10 households in the Philippines have an annual disposable income
below the mean:
In 2014, the Philippines mean household annual disposable income stood at US$9,481.
Nevertheless, this is not a reflection of realities in the country, as at least 63.2% of Filipino
households have an annual disposable income below that level. For companies, the countrys
relatively low income level means that a large segment of households in the Philippines can
be targeted for necessities and budget goods and services.
Chart 7

Household Income Distribution: 2014

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Source:

Euromonitor International from national statistics

In 2014, the Philippines middle class composed of households with an income between
75.0% and 125% of median income totalled 5.4 million households, an 11.1% increase over
its 2009 levels, as a result of the countrys economic growth and the governments income
redistribution programme. As a percentage of the countrys total number of households,
however, the countrys middle class declined slightly from 24.6% in 2009 to 24.1% in 2014;
The expansion of the Filipino middle class is expected to continue over the period of 20152030, with the number of middle class households forecast to reach 7.9 million (equivalent to
24.9% of the total) by 2030. While stable economic growth will support this trend,
improvement in income distribution will be vital to ensure a sustainable growth of the middle
class in the Philippines.

CONSUMER EXPENDITURE BY CATEGORY


Education Spending Will Grow the Fastest
The proportion of discretionary spending of Filipino households remained relatively low but is
set to rise in the long term:
Total consumer expenditure in the Philippines increased at an average annual rate of 4.9% in
real terms between 2009 and 2014 (equivalent to a total real increase of 26.9% during that
period) to reach PHP9.1 trillion (US$205 billion) by 2014. The expansion was supported by
rising per household disposable income levels, coupled with growing remittances inflows and
positive consumer confidence on the back of the countrys strong economic performance. For
the forecast period of 2015-2030, the Philippines total consumer expenditure is estimated to
grow faster, by 5.8% in real terms on average per year, backed by the countrys positive
economic outlook;
The share of non-discretionary spending (expenditure on food, non-alcoholic beverages and
housing) out of total consumer spending stood at 54.5% in 2014, significantly higher than the
average for Asia Pacific in the same year (41.0%). This was due to the Philippines relatively
high cost of food, while generally reflecting the countrys relatively low income levels. Over the

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long term, the share of non-discretionary spending out of total consumer spending in the
Philippines is forecast to decline gradually to 50.6% by 2030, as rising levels of disposable
income allow households to allocate more resources to categories other than basic needs.
Education, hotels and catering and leisure and recreation will be the fastest growing
consumer expenditure categories in the Philippines:
Over the 2009-2014 period, the Philippines best performing category was health goods and
medical services (registering a 41.3% increase in real terms during this period), followed by
miscellaneous goods and services (a 37.9% rise in real terms over the same period) and
hotels and catering (32.7%). This is because Filipino consumers are willing to spend more for
their health, while they tend to go out for dining more often as income increases;
During the period of 2015-2030, education is forecast to emerge as the fastest growing
consumer expenditure category, as Filipino parents are more willing to pay for private and/or
extra tuition so that their children can realise the best education possible. Hotels and catering
and leisure and recreation will be the second and third fastest growing category, driven by the
countrys youthful population and the rising trend of dining out and vacations more frequently;
Chart 8

Source:
Note:

Real Growth Indices of Fastest Growing Consumer Spending Categories:


2015-2030

Euromonitor International from national statistics/UN/OECD


Data are forecasts.

Between 2009 and 2014, alcoholic beverages and tobacco and clothing and footwear were
the categories showing the weakest performance, increasing by 8.8% and 9.4% in real terms
respectively over this period. Growth in alcoholic beverages and tobacco spending has been
affected by the governments higher sin taxes on alcoholic drinks since 2013. Meanwhile,
growth in clothing and footwear spending has been subdued, due to factors like the
widespread availability of cheap imported clothes and increasing price competition amongst
clothing retailers;
Over the period of 2015-2030, alcoholic beverages and tobacco and clothing and footwear will
continue to be categories showing the slowest rate of expansion in the country, due to the

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same reasons. Household goods and services is expected to be the third weakest performing
category during the forecast period, partly due to the falling prices of household appliances.
Chart 9

Source:
Note:

Real Growth Indices of Slowest Growing Consumer Spending Categories:


2015-2030

Euromonitor International from national statistics/UN/OECD


Data are forecasts.

CONSUMER EXPENDITURE BY REGION


National Capital Region Has the Highest Purchasing Power
Consumer spending in the Philippines concentrates in the countrys capital region:
Total consumer expenditure in the National Capital region, also known as Metro Manila,
amounted to US$48.4 billion or 23.5% of the countrys total consumer expenditure in 2014, up
from US$30.3 billion in 2009. Being the Philippines economic hub and political centre, Metro
Manila is also the second most populous region in the country. Combined with its high
spending power, the region is certainly the most important market in the Philippines;
By 2030, consumer expenditure in the National Capital region is forecast to reach US$235
billion, accounting for 22.7% of the countrys total by that year. This will be driven by the
regions solid economic growth and relatively high disposable income level. Other key
markets in the Philippines will continue to be Calabarzon and Central Luzon, which will make
up 20.6% and 12.9% of the countrys total consumer expenditure by 2030 respectively.
Chart 10

Total Consumer Expenditure by Region: 2014

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Source:

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The National Capital region also features the highest per household consumer expenditure
levels:
As the seat of the government, as well as home to major industries and companies in the
Philippines, the National Capital region often offers the highest-paid employment opportunities
in the country. The region, therefore, had the highest levels of consumer spending per
household across regions, at US$15,971 in 2014. The Philippines most populous region
Calabarzon had the second highest levels of per household consumer expenditure, at
US$11,932 in the same year;
Meanwhile, the Autonomous in Muslim Mindanao region posted the lowest levels of consumer
spending, at U$4,992 in 2014. The region has a high poverty rate, while a long history of
conflict has affected its socio-economic development.
Chart 11

Per Household Consumer Expenditure by Region: 2014

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Source:

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CONSUMER EXPENDITURE BY INCOME LEVEL


Stark Differences in Spending Pattern Across Income Levels
Spending levels among households in the Philippines are marked by the countrys unequal
income distribution:
In 2014, the Philippines households in decile 10 spent 7.6 times as much as households in
decile 1. In terms of annual disposable income, this factor was 25.3 in 2014, reflecting rich
Filipino households capacity to save, while poor households generally have to spend the
totality of their income. The categories showing the greatest difference in spending between
deciles 10 and 1 were hotels and catering and leisure and recreation, where decile 10 spent
47.7 and 32.7 times as much as decile 1 respectively in 2014;
All income deciles in the Philippines saw their per household consumer expenditure growing
during the 2009-2014 period. Consumer expenditure per household for decile 1 grew by
48.0% in US$ terms, the highest increase across all deciles. Meanwhile, decile 10 witnessed
the slowest growth in consumer expenditure per household, at 40.6% in US$ terms between
2009 and 2014. This is mainly because wealthy households in the Philippines were more
affected by the countrys economic recession in 2009 and the global economic downturn,
which resulted in lower profits on their assets and investments. In 2015, households in all
income deciles are expected to record an increase in consumer expenditure in US$ terms.
There are large differences in the spending patterns across income levels:
In 2014, low-income households in decile 1 in the Philippines allocated 77.5% of their total
expenditure to non-discretionary spending, compared to 60.8% for households in decile 5

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(middle-income households) and 41.5% for households in decile 10 (high-income


households);
Compared to 2009, the proportion of non-discretionary spending for deciles 1 and 5 declined
from 78.1% and 61.1% respectively in that year, owing to rising levels of per household
disposable income for the two deciles during this period. The share of non-discretionary
spending for decile 10, however, rose slightly from 41.0% in 2009 to 41.5% in 2014, as growth
in decile 10 households disposable income was subdued during the period;
Over the period of 2015-2030, the share of non-discretionary spending out of total consumer
spending is forecast to decrease further, for decile 1 (from 77.2% to 74.1%), decile 5 (from
60.5% to 56.7%) and decile 10 (from 41.4% to 37.4%).
Chart 12

Source:
Note:

Spending Patterns of Deciles 1, 5 and 10: 2014

Euromonitor International from national statistical offices/OECD


A:
Food and non-alcoholic beverages; B:
Alcoholic beverages and tobacco; C:
Clothing and footwear; D:
Housing; E:
Household goods and services; F:
Health goods and medical services; G:
Transport; H:
Communications; I:
Leisure and recreation; J:
Education; K:
Hotels and catering; L:
Miscellaneous goods and services. The figure in brackets refers to the average disposable
income of households in each decile.

Decile 10 accounted for 22.5% of total consumer spending in the country in 2014:
Hotels and catering is the most discretionary spending category in the Philippines, with
households in decile 10 concentrating 35.9% of total category spending in 2014. Ranking next
as the second most discretionary category was education, for which decile 10 represented
31.9% of total category spending respectively in 2014;
On the other hand, the least discretionary spending categories (those to which deciles 1, 5
and 10 channel a broadly similar share of their spending) were food and non-alcoholic
beverages (due to its status as a basic necessity) and alcoholic beverages and tobacco
(reflecting widespread consumption of this category across income levels).
Chart 13

Category Expenditure by Each Decile as a Proportion of Total Category


Spending: 2014

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Source:

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DEFINITIONS
Deciles
Deciles are calculated by ranking all of the households in a country by disposable income
level, from the lowest earning to the highest earning. The ranking is then split into 10 equal
sized groups of households. Decile 1 refers to the lowest earning 10.0%, through to Decile 10,
which refers to the highest earning 10.0% of households.

Discretionary Spending
Discretionary spending is the expenditure by consumers or households on all consumerspending categories other than the essentials of food and non-alcoholic beverages and housing.

Disposable Income
This is gross income minus social security contributions and income taxes.

Gross Income
Annual gross income refers to income before taxes and social security contributions from all
sources including earnings from employment, investments, benefits and other sources such as
remittances.

Mean Income
The mean income also referred to as the average income is the total or aggregate income
divided by the number of households.

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Median Income
The median income is the amount which divides the household income distribution into two
equal groups, half having disposable income above that amount and half having income below
that amount.

Middle Class
The middle class is defined as the number of households with between 75.0% and 125% of
median income.

Non-discretionary Spending
Non-discretionary spending is the expenditure by consumers or households on the two
essential categories of food and non-alcoholic beverages and housing.

Social Class A
Social Class A presents data referring to the number of individuals with a gross income over
200% of an average gross income of all individuals aged 15+.

Social Class B
Social Class B presents data referring to the number of individuals with a gross income
between 150% and 200% of an average gross income of all individuals aged 15+.

Social Class C
Social Class C presents data referring to the number of individuals with a gross income
between 100% and 150% of an average gross income of all individuals aged 15+.

Social Class D
Social Class D presents data referring to the number of individuals with a gross income
between 50.0% and 100% of an average gross income of all individuals aged 15+.

Social Class E
Social Class E presents data referring to the number of individuals with a gross income less
than 50.0% of an average gross income of all individuals aged 15+.

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