[READOUT] What Philippine borrowing tells businesses ahead of 2027

Nico Villarete/Rappler

Here are three credit insights to keep in mind, covering consumer borrowing trends, business lending, and the national debt

AT A GLANCE

• Filipino consumers are increasingly using credit as a cash flow tool, with a notable rise in buy-now-pay-later (BNPL) adoption, despite a cautious outlook on personal finances.
• Business credit remains selective, with significant growth in loans for infrastructure-linked industries, while sectors like construction are struggling.
• The national debt is rising, impacting fiscal space for government spending, which could limit funding for infrastructure projects that enhance private sector productivity.

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It turns out whether you’re running a household or the country, debt is becoming a bigger part of the picture. For businesses though, what matters more than the mere fact that borrowing is rising is what that debt is being used for and whether enough value is generated in return.

Here are three points worth watching as you plan for 2027.

First, credit is becoming an important cash flow tool for Filipino consumers amid a challenging economic environment, and this could have implications for what payment options retailers should prioritize offering.

Rappler sat down one-on-one with Peter Faulhaber, president and CEO of TransUnion Philippines, whose latest Credit Perception Index reached a record 75 as Filipinos became more knowledgeable, trusting, and favorable toward credit overall. 

But this growing comfort with borrowing is happening with a still-cautious consumer. TransUnion’s report found respondents less confident about their own finances over the next three months and one year. The Bangko Sentral ng Pilipinas’ (BSP) Q3 survey also showed consumers had weaker plans for day-to-day household spending even as their expectations for future income and employment improved.

A deeper look into the lending data helps explain how those two things can coexist. The BSP found that credit card receivables jumped 24.9% year on year to P1.3 trillion in July and salary-based general purpose loans rose 15.7%, while motor-vehicle loans grew just 4.5%. TransUnion, meanwhile, reported that buy-now-pay-later (BNPL) products had the strongest growth in adoption, with what Faulhaber called a “large take-up rate” and “strong favorability.”

The emerging picture: cash-strapped consumers may be using shorter-term loans to manage when expenses are paid, rather than simply to fund large purchases. Around 59% of credit users told TransUnion they borrow for emergency expenses, ahead of personal expenses and utility bills, a pattern Faulhaber described as a sign of greater maturity.  

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For retailers, that may mean rethinking which payment options get the most emphasis. BNPL, installments, and cards can help customers manage tight cash flow and avoid delaying a purchase. Some 43% of Filipinos surveyed said they plan to borrow or use credit to make purchases, up 5 percentage points from last year. BNPL was the credit product most commonly viewed as “helpful” at 54%, ahead of credit cards at 49%. Cost could limit uptake, however, with 54% citing high interest rates as a reason to avoid credit.

Second, in today’s difficult macroeconomic environment, business credit has become selective, but not weak.

Production loans remain almost five times larger than consumer credit at P13.2 trillion and account for roughly three-fourths of local bank lending, according to BSP data. But the fastest growth is concentrated only in particular parts of the economy:

• Fastest growth came from infrastructure-linked industries. Water and waste loans rose 26.2%, transport and storage 25.1%, electricity and gas 24.4%, and accommodation and food services 16.3%.
• The biggest loan books grew more slowly. Real estate rose 5.5% to P2.89 trillion, wholesale and retail 8.8% to P1.64 trillion, and manufacturing 7.2% to P1.28 trillion.
• Construction was the clear weak spot. Loans fell 13.3% year on year to P447.5 billion.

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Third, keep an eye on the national debt and how it could tighten fiscal space for everyone.

National government debt stood at P19.39 trillion in July, while financial expenses in the proposed 2027 budget reached P1.114 trillion. Neither the World Bank nor the economists Rappler spoke with sees an immediate debt crisis, given that much of Philippine debt is long-term, domestic, and peso-denominated.

The concern for business is the squeeze on fiscal space. Interest costs have risen from around 10% of government spending before the pandemic to about 16.7% today, leaving the Marcos administration less room to fund infrastructure and other projects that might have otherwise improved private sector productivity.

Rappler resident economist JC Punongbayan puts it neatly. “Borrowing for productive investments is defensible, but borrowing for overpriced, substandard, or ghost projects only worsens the debt problem.”

We hope this readout helps inform your next strategy or boardroom decision. And as always, feel free to tell us what to tackle next, dear business leader. – Rappler.com

Readout is a new content series from data consultancy The Nerve, bringing you insights that bridge the gap between quick news headlines and dense technical reports. Readout tracks and explains business shifts in different Philippine industries. Crafted from on-the-ground reporting and data-driven analyses, Readout provides a clear read on where market and consumption are headed, what’s shaping demand across different sectors, who the key players are, and why it all matters.