The sharp rise in the price of services and goods the past many months has forced the young and middle-class segment of the population to cut back on non-essential spending and even on food, the Manila unit of the Japan-based Nomura Research Institute (NRI) reported on Tuesday.
According to the NRI, inflation in the Philippines as high as 8.7 percent at one point forced a staggering 94 percent of young Filipinos to acknowledge the debilitating impact of inflation on the pocket by cutting down expenses on food and beverages, transportation, the utilities and even the internet.
NRI particularly reported that 60 percent of young Filipinos popularly referred to as Gen Z and the millennial crowd felt the impact of inflated prices the most on food and beverage costs as headline inflation went north of 3 percent at the start of 2022 to its peak of 8.7 percent a year later.
Fifteen percent of young Filipinos reported feeling the price spiral also on transportation and fuel costs and another 14 percent felt it impact on their utilities bills such as water, electricity and even the internet.
“Additionally, an overwhelming 83 percent of participants stated that they had reduced their spending on non-essential goods, while 79 percent found it necessary to cut back on leisure and entertainment expenses,” the NRI survey revealed.
“Approximately one-third of respondents (32 percent) reported being unable to save over the past 6 to 12 months. For those who managed to save, 44 percent saved a lower percentage of their income. The persistent inflationary pressures have led 38 percent of respondents to adjust their savings goals by either reducing the target amount or delaying their timelines. Similarly, 47 percent of participants had to make similar adjustments to their savings plans.
“To cope with the financial strain, a significant number of respondents have turned to loans. Of the surveyed individuals, 71 percent reported having outstanding loans. In an attempt to augment their incomes, 43 percent of respondents resorted to taking out additional loans in the past year. Among those who already had loans, 58 percent had to cut back on other expenses to meet their loan obligations, while 19 percent were forced to delay payments. The survey also revealed that 41 percent of respondents possessed credit cards. Personal loans were the most prevalent type of loan, accounting for 30 percent of respondents, followed by alternative installment loans and salary loans, each representing 19 percent respectively.
“On investments, 52 percent of respondents had existing investment portfolios. Among these, mutual funds and stocks were the top investment products, chosen by 18 percent of participants each. However, due to the inflationary pressures, 12 percent of respondents had to partially liquidate their holdings for increased liquidity, and a minimal 1 percent sold off their entire investment portfolio,” the NRI reported.
According to the NRI survey, the bulk of young Filipinos or 94 percent of their number believe that high prices were to prevail over the next six to 12 months, a perception that economists call inflation expectation which can be bad and self-fulfilling unless address correctly by those in authority.
“Consequently, 91 percent of participants felt the need to explore additional income streams. To adjust to the current economic situation, 86 percent of respondents planned to continue cutting back on expenses, while 73 percent intended to reduce their spending on entertainment and leisure activities,” the NRI said.
“In terms of savings, 34 percent of participants expressed plans to increase their savings allocations to better prepare for the future, while 33 percent aimed to maintain their current savings pattern. However, 16 percent of respondents planned to reduce their monthly savings allocation due to inflationary pressures.
“The survey also shed light on borrowing habits, with 46 percent of respondents indicating that they were less likely to take out loans, while 28 percent stated they were more likely to acquire additional loans.
“Regarding investments, 12 percent expressed a desire to explore risky investments in the hopes of achieving high returns over the next 6 to 12 months. Meanwhile, 40 percent were considering more conservative options. Notably, 30 percent stated that they would choose to stay away from investing altogether, while 18 percent aimed to maintain liquidity,” the NRI said.
The online survey included 295 adults from Metro Manila, consisting of 92 Gen Zs and 203 Millennials from the middle-class. The participants had monthly individual income ranges of P13,000 to P41,000 and P41,001 to P163,000.
As inflation continues to impact the daily lives and financial well-being of Metro Manila’s middle-class Gen Zs and Millennials, it is clear they are actively seeking ways to navigate these challenges and secure their financial future, the NRI said.
