Despite geopolitical uncertainties, Philippine CEOs (chief executive officers) are optimistic of business growth because of an improving economy, which they noted is faster than most countries in the world.
A survey done by British professional services brand PricewaterhouseCoopers (PwC) and the Management Association of the Philippines from July 8 to August 9 this year showed that 85 percent of 157 CEOs are confident that their companies would post revenue growth in the next 12 months, versus the 79 percent that expressed confidence last year, reported Business World.
For the next three years, 86 percent of CEOs surveyed said they are confident of revenue growth, which, however, mildly slipped from last year’s survey of 87 percent.
The survey also showed that 86 percent of the CEOs are confident about industry prospects for the next 12 months, higher than the 83 percent seen in the previous survey. This is the highest level of optimism since the pandemic, the paper added.
Faster growth
“What helped drive optimism among our CEOs here in the Philippines is mainly our country’s economic growth,” said Karen Patricia Rogacion, deals and corporate partner at PwC in a press briefing Monday, September 9.
She noted the Philippines recorded faster economic growth despite geopolitical uncertainties, which have affected economies in the United States and Europe.
“When the year started, at the global level, we had a slow start. We are still feeling the impact of the Russia-Ukraine war as well as the impact of China’s real estate crisis,” she said.
“Several economies, such as the US and even Europe, were expecting a recession because of the high interest rates and unstable market conditions. In the Philippines, however, we showed fast growth,” she added.
The Philippine economy grew by 6 percent in the first six months of the year, hitting the low end of the government’s target of 6-7 percent this year, Business World said.
CEOs surveyed said infrastructure development, domestic consumption, and foreign direct investments are the main drivers of growth in the next 12 months.
“Given the top three drivers, it’s also been consistent that the CEOs say that our government is doing a good job in pushing for infrastructure development, forging stronger relationships with other nations, and also managing inflation,” added Rogacion.
Uncertainties still
But 62 percent said geopolitical uncertainties arising from the Russia-Ukraine war, conflicts in the West Philippine Sea, and upcoming elections in other countries are keeping them awake at night.
“We have actually been indirectly and directly affected by challenges due to global supply chain pressures, inflation, and other related threats,” she said
Donald Lim, chair of the MAP CEO Conference Committee, said CEOs fear geopolitical uncertainties as these may suddenly disrupt supply chains and operations.
“I think the geopolitics, whether Ukraine-Russia or even the West Philippine Sea, are a great unknown. We don’t know what will happen. But if that happens, it will have a severe impact on the business,” he added.
Adapting to risks
However, Roderick Danao, chairman and senior partner of PwC, said that some companies are already starting to manage and mitigate the effects of geopolitical uncertainties.
Danao said a few local companies have effectively managed mitigating the effect [through] product diversification, market diversification, and supply-chain diversification. Needless to say, all these have to be backed up by long-term risk management plans for the company to adapt and proactively manage the impact of geopolitical risks, he added.
AI impact
The survey also showed that 46 percent of CEOs believe that their company will no longer be viable after 10 years if it continues running on its current path.
PwC said new technologies such as generative artificial intelligence (GenAI) would revolutionize business models, redefine work processes, and transform industries. Danao added that AI will bring more opportunities than threats.
Already, 40 percent of CEOs said they have adopted the technology, while 71 percent believe that GenAI will change how their companies create, deliver, and capture value.
Still, 78 percent said the technology can improve the quality of their company’s products and services while another 61 percent have not yet widely adopted the technology in their operations, which is understandable as AI is still in its nascent stage in the Philippines.
“The awareness is still very low at the Philippine corporate level. We are all excited about what this AI can bring into our organization. But embedding AI is still a work in progress. There will be investments and workforce upskilling needed,” Danao said.
“We are just at the tip of the iceberg. I think you’ll be lucky to have real AI adoption across the majority, meaning more than 50 percent, in five years. It will be a long time,” Lim added.
Mary Jade Roxas-Divinagracia, PwC’s managing partner for deals and corporate finance, said AI adoption will be led by industries in healthcare, banks, financial institutions, and retail The BPO sector could do well to adopt AI, she added.
Lim said AI may result in job losses if the workforce is unable to keep up.
“AI won’t replace jobs. Those people who use AI will replace those who do not know how to use it. So, I think the problem is more on education because the teachers do not understand this,” he said.
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