Retail sector expected to reach 20% of GDP by year-end

The retail sector in the Philippines is projected to increase its contribution to the country's gross domestic product (GDP) to 20% by the end of this year, driven by continued consumer spending. Philippine Retailers Association (PRA) President Roberto Claudio shared this optimistic forecast with reporters, highlighting the sector's steady growth over recent years.

Currently, the retail industry accounts for 18.6% of the national GDP and has consistently contributed nearly %u20B1750 billion annually in taxes from 2018 to 2023. Retail also plays a significant role in employment, providing jobs directly to approximately five million Filipinos.

Claudio noted that the sector's growth is bolstered by persistent consumer demand, though it faces challenges from the rise of online marketplaces. These platforms are currently not subjected to value-added tax (VAT), creating a competitive disadvantage for traditional brick-and-mortar stores. This disparity not only affects physical stores' ability to compete on price but also results in potential revenue losses for the government due to decreased tax declarations from struggling retailers.

The PRA is hopeful that a proposed VAT measure on online transactions, which has passed both the House of Representatives and the Senate and is awaiting approval from President Marcos, will help address this issue and level the playing field.

Looking ahead, Claudio anticipates that online retail will continue to grow, potentially capturing 25% of retail sales in the next three to five years. Despite this shift, he emphasized that physical stores will remain important for certain shopping experiences. The future of retail is expected to be omnichannel, integrating both digital and physical shopping experiences to meet diverse consumer needs.

As of 2023, online retail transactions account for 15-20% of total retail sales. Claudio stated that around 30-40% of retailers have already adopted an omnichannel approach, blending digital and physical retail strategies to enhance customer engagement.

"The new retailing will serve the customer in whatever way they prefer," Claudio said. "Both online and brick-and-mortar stores will coexist in what we call the omnichannel world."