A slowdown in luxury spending may benefit the economy as demand could shift to locally-produced goods, according to the Department of Economy, Planning and Development (DEPDev).
‘I like that if there’s a slowdown in those areas, because these are very import-dependent anyway,’ DEPDev Secretary Arsenio Balisacan told reporters.
Balisacan said luxury goods, which are being imported by the country, generate little domestic economic activity.
‘If our consumers are shifting to locally produced goods that are not as luxurious. then it creates more economic activity,’ he said.
Balisacan was asked to comment on luxury spending amid a government probe on anomalous flood control projects that has also put the lavish lifestyles of those allegedly involved and their children under public scrutiny.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said in an email that the actions being taken by the government to address flood control corruption issues could impact luxury spending in the country.
Among the steps taken by the government is the creation of the Independent Commission for Infrastructure to investigate and recommend appropriate charges against government officials or individuals involved in anomalies in flood control and related projects in the last 10 years.
‘Spending on big ticket luxury items such as vehicles, homes, among others could be potentially adversely affected by the recent anti-corruption measures, as some of the alleged funds from corruption are channeled or allegedly laundered to these high-end luxury items,’ Ricafort said, noting it is still a wait-and-see situation.
In recent years, Ricafort said legitimate sources of wealth including gains from financial markets, property and business sales, as well as inheritance have helped sustain demand for high-end or luxury products in the country.
According to Ricafort, some foreign buyers also contribute to the demand for luxury products within the bounds of the law.
The country’s favorable demographics and economic growth story are also seen to support demand for luxury items.
When it comes to luxury vehicle sales, Toyota Motor Philippines Corp. first vice president for marketing Elijah Marcial said the segment continues to make up 0.7 percent of the entire Philippine automotive market as of September.
Lexus is Toyota’s luxury brand.
Marcial said that while they observed a slowdown compared with the same period last year, ‘it can be attributed to the weather.’