Taxwise Or Otherwise
By Mary Jade Roxas and Rakesh Mani
Economic disruptions do not create strategic problems. They expose them. The compression bearing down on the Philippine economy in 2026 — an ADB growth downgrade to 4.4%, energy price volatility transmitting through cost structures, and a remittance-dependent consumption base absorbing the consequences of Middle East instability — is both real and material.
For the top conglomerates, the more consequential question is not how to manage a difficult year. It is whether this disruption will be used, deliberately, to reshape organizations for the cycle ahead. That distinction — between enduring a shock and creating advantage from it — is where trajectories diverge.
The nature of the pressure demands clarity. The $36 billion of remittances in 2025 — 7.3% of GDP — did not flow uniformly. It concentrated in provincial households that drive consumer goods volumes, property demand and retail activity; and when Gulf employment is uncertain, the spending pullback in these segments can be faster and sharper than forecasts suggest. Packaging costs in consumer-facing categories are spiking 40% to 100%, and inventory buffers sit at six to eight weeks. Margin and credit quality pressure is a Q3 event. The window to restructure ahead of it is now.
1. DIAGNOSE THE COST BASE BEFORE YOU CUT IT
Most conglomerates have not had a compelling reason to examine with rigor which parts of their cost base are generating competitive returns, and which have simply accumulated in years of expansion. Categories attracting minimal scrutiny in a budget cycle — trade promotion spend in consumer businesses, middle-layer coordination functions across subsidiary groups, procurement relationships maintained by familiarity rather than by value, marketing commitments rolled forward yearly — are often those that have grown most invisibly and resist challenge.
This is not a management failure. It is a rational response to an environment in which rising demand made precision feel unnecessary. But it leaves most conglomerates carrying a significant weight of non-differentiating cost. PwC’s advisory work across the region — through our ‘Fit For Growth’ program — consistently identifies 15% to 20% of operating costs in diversified groups that neither create competitive advantage nor are structurally essential. In a compressed environment, that cost is not merely inefficient. It is the direct opportunity cost of survival, and investments that would build durable competitive distance.
2. PROTECT THE CAPABILITIES THAT COMPOUND
The same discipline that releases non-differentiating cost must also protect what genuinely compounds. The credit risk analytics that enable a bank to lend profitably into underserved segments at scale; the cold chain infrastructure a competitor cannot replicate quickly; the product development capability that sustains an innovation pipeline. Fund these unconditionally, even as restructuring moves forward. The failure mode in compressed cycles is rarely undercutting. It is cutting, in the name of austerity, the capabilities that would otherwise power the next decade of growth.
3. PRECISION, NOT AUSTERITY
What separates the strategic response from the instinctive one is precision — in diagnosis, in execution, and in where the freed capital goes.
In consumer goods, the usual response to input cost inflation and demand compression is to pass on price increases broadly. In the current environment, that is the response most likely to accelerate volume loss in segments under the greatest pressure, and to erode the brand equity that takes years to rebuild.
The more effective path — albeit harder to execute — is to restructure pack architecture at critical price points, apply genuine zero-based evaluation to trade promotion budgets whose returns have never been rigorously measured, and use consolidated procurement reviews to extract supplier pricing that scattered relationships have never delivered. All of this with the help of technology and AI.
In financial services, the equivalent challenge is managing credit quality through an income shock without retreating from segments that represent long-term structural opportunity. The banks and consumer finance businesses that invest now in the analytics to distinguish genuinely deteriorating credit quality from temporarily stressed borrowers — and price and provision accordingly — will maintain the lending relationships that less sophisticated competitors will exit and struggle to rebuild.
Across sectors, the principle is consistent. Austerity is a blunt instrument. Precision — knowing which costs to cut without consequence and which would be strategically destructive to touch — marks the difference between organizations that use this period to strengthen their competitive footing and those that merely survive or muddle through.
4. DEPLOY INTO THE WINDOW WHILE IT’S OPEN
The redeployment of freed capital is where the most important, and most frequently deferred, decisions live. Distressed conditions concentrate M&A opportunity in a narrow window — typically 12 to 18 months following the onset of material disruption — when valuations compress, motivated sellers emerge, and the competitive field thins at the very moment execution capability is most scarce.
The assets available in this window — whether across distribution infrastructure, branded businesses or digital capability — will not be accessible at comparable valuations once confidence recovers.
PwC’s most recent Global CEO survey, in its Philippine edition, found that 75% of business leaders planned to reinvent beyond their core. The ones whose reinvention will land are those who fund it from genuine cost discipline when competitors are retrenching — not from incremental capital in the recovery, when every organization in the market is reaching for the same positions at once.
5. UPGRADE BEFORE THE LABOR MARKET CLOSES
Talent is equally time-bound. Mid-market competitors under acute margin pressure will release people that well-capitalized, strategically clear organizations should be recruiting now — before the recovery closes the window. The same logic applies to technology investment: AI and digital capabilities that simultaneously compress operating cost and build analytical advantage can be accelerated precisely because the near-term cost base is stronger than it was 12 months ago.
THE CHOICE THE CYCLE DEMANDS
The ADB projects a return to 5.5% growth for the Philippines in 2027. That recovery will come. What it will not do is rescue organizations that spent the intervening period in strategic drift — cutting without conviction, preserving cost structures that no longer serve any competitive purpose, and deferring investments that compound powerfully. Winning companies will make consequential choices now, in conditions that most of their competitors are treating as a reason to wait.
Disruption, managed with discipline, is not an interruption to strategy. It is strategy’s most demanding and most productive operating environment.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Mary Jade Roxas is a partner with PwC Philippines and serves as the managing partner for the Deals practice. She is an expert in M&A advisory and large-scale transformations.
Rakesh Mani is a partner with PwC Malaysia and serves as Asia Pacific Consumer Markets leader. He specializes in large-scale cost and efficiency transformation programs.
