As we move toward the midpoint of Q2 2025, it’s a good moment to pause and reflect on how far the Philippine economy has come and where it’s headed. The latest economic data in the Philippines paints a picture of steady GDP growth, easing inflation and a retail sector that’s gaining momentum. These are more than just numbers; they’re signals of opportunity for the credit market. At TransUnion^® Philippines, we see this as a time to sharpen strategies, support responsible lending, and help more Filipinos access the financial tools they need to thrive.


A cooling yet resilient economy

The Philippine economy posted 5.4% year-over-year GDP growth in Q1 2025.¹ This figure is slightly higher than the previous quarter’s 5.3%, though it fell short of the 5.9% consensus forecast. On a seasonally adjusted basis, growth momentum eased to 1.2% quarter on quarter. This suggests while the economy continues to expand, the pace is beginning to cool. Despite this moderation, the underlying fundamentals remain solid. Government spending rose sharply by 18.7% year over year,² largely influenced by pre-election activity. Meanwhile, household consumption remained robust, accounting for over 70% of GDP³ and growing at a healthy 5.3% year over year.⁴

What stands out even more is the sharp decline in headline inflation — which dropped to 1.3% in May, marking the lowest level since 2019.⁵ Cheaper consumer staples have restored real purchasing power to Filipino households, creating healthier disposable income buffers in the near term. For the credit market, these developments typically translate into stronger repayment capacity. Historically, this has also led to lower delinquency formation, particularly in small-ticket loans and credit card balances.

Additionally, the Bangko Sentral ng Pilipinas has signaled a possible 25-basis-point policy rate cut in the second half of the year. This accommodative stance could further ease funding costs and help sustain credit appetite across the lending ecosystem.⁶


Retail sector: The engine of consumption

Retail is clearly leading the consumption wave. According to Kantar,⁷ essentials and value retailers are seeing a projected 5% lift in FMCG sales this year, supported by election spending and lower inflation. Convenience stores, sari-sari stores and minimarts remain deeply rooted in daily life, with 30% of Filipinos considering them their “third space” and 6 in 10 Filipinos visiting them weekly. 

Meanwhile, mall-based chains are thriving. SM Supermalls reported daily foot traffic of 5.2 million in 2024, a 6% increase from the previous year and already above pre-pandemic levels.⁸ Altogether, the wholesale and retail trade sector expanded by 6.4% year over year in Q1 2025,⁹ reinforcing the sector’s role as a key economic driver.

For lenders, this retail boom translates into more card swipes, BNPL transactions and small-ticket loans. We expect to see increased participation from thin-file consumers and first-jobbers as these segments are crucial for expanding financial inclusion.


Implications for the credit market

The convergence of lower inflation and robust retail activities is creating a favorable environment for credit growth in the months ahead. Here’s what we anticipate:

• Healthier repayment capacity: With real incomes improving, households are better positioned to manage their financial obligations. This typically leads to fewer missed payments, particularly in the revolving credit segment. Lenders with strong risk controls may see marginal improvements in early-stage delinquency ratios over the next two quarters. According to TransUnion Philippines’ database, the early-stage delinquency rate (30+ days past due) for credit cards declined by 11 basis points, from 3.06% in Q2 2024 to 2.95% in Q4 2024.
• Origination growth: Increased retail activity is driving more card swipes, BNPL transactions and small-ticket installment loans. This trend points to continued expansion in the credit-active population, particularly among thin-file consumers and first-jobbers. Over the next two quarters, lenders can expect a steady rise in demand from these emerging segments. In Q1 2025, TransUnion Philippines recorded a sharp 47% year-over-year rise in credit demand from the new-to-credit (NTC) segment,¹⁰ fueled by strong interest in credit cards and personal loans. However, despite this surge in demand, credit supply grew at a more modest pace of 11%, reflecting a measured response from lenders amid evolving borrower profiles.
• Confidence builds balances: Consumer confidence is also expected to rise, supported by election-related spending and job stability. As a result, card balances are likely to climb. Lenders should consider dynamic limit management strategies to capture this growth while maintaining prudent risk oversight. TransUnion data shows unsecured outstanding balances rose by a robust 29.3% in Q4 2024 compared to Q4 2023. Auto and housing loan balances also increased during this time, posting year-over-year growth of 12.4%.

Looking ahead