CEO confidence falls amid pandemic

By Jenina P. Ibañez, Reporter

MORE than half of chief executive officers (CEO) are still confident of their companies’ revenue growth over the next year, although overall confidence declined due to uncertainty brought by the pandemic, according to results of the PwC Philippines-Management Association of the Philippines survey.

Results showed that 59% of 161 CEO respondents were confident that their company will see revenue growth in the next 12 months, but this was significantly lower than the 88% last year and 89% in 2018.

More CEOs answered the survey conducted in July to August 2020, with less than 130 respondents in each of the two preceding years.

Majority of those surveyed were in the technology, manufacturing, financial services, and outsourcing industries. Half of the respondents came from large businesses, while 34% were from medium-sized enterprises and 10% were from micro and small businesses.

The survey showed most CEOs expect revenue and sales losses in 2020, with a third of respondents estimate 10-30% in losses and a fifth expect losses of 30-50%.

Among micro businesses, a fifth of respondents expect over 50% in losses, compared with 13% of small businesses and nine percent of both medium and large enterprises.

Around 58% are confident about their own industry’s prospects for growth for the next 12 months. The most confident CEOs belong to media and entertainment, outsourcing, professional services, and technology, while those who are least optimistic belong to the hospitality, automotive manufacturing, and retail industries.

“Some of these industries are badly hit, and some of them thrive during the pandemic, but you can say 40% — from the results of the survey — were badly hit,” PwC Philippines Chairman and Senior Partner Alexander B. Cabrera said in a press conference on Monday.

The survey was conducted after the stricter lockdown measures were lifted and some businesses were improving, PwC Philippines Deals and Corporate Finance Managing Partner Jade Roxas-Divanagracia said.

“The general sentiment of the business community of staying confident and optimistic would be representative of what most businesses would actually see at that time,” she said.

Quarantine restrictions around the country began easing in June, although Metro Manila temporarily reverted to a stricter lockdown for two weeks in August.   

The survey also showed organizations are more confident about longer-term growth, with 90% of respondents saying that they expect revenue growth in the next three years. This reflects their attitude about the Philippine economy, with 83% believing that it will recover within three years.

In terms of GDP, 36% believe that there will be more than 4% gross domestic product (GDP) contraction this year, while 27% said that they expect one to two percent GDP growth by next year.

The Philippine economy entered a recession as GDP shrank by a record 16.5% in the second quarter. The government expects GDP to contract by 4.4-6.6% this year.

Among the key growth drivers identified by the CEO respondents were infrastructure, domestic consumption, and government spending.

The respondents also identified the top areas they believe the government should focus on — the healthcare system, infrastructure, and agriculture. Around 70% said that the government should provide industry-specific measures to restore business confidence.

COST CUTTING
The COVID-19 action plans from CEOs are mainly cost-cutting measures, with 80% of respondents saying that they plan to implement some form of cost containment.

Some 37% said they would reduce the workforce and 24% said they would cancel planned acquisitions. Seven percent said they would exit an overseas market to save on costs.

In addition, 57% said they will implement sustainable practices and at least half said they would cancel planned capital investments and upskill the human resources team.

Once the businesses are able to transition to on-site work, most of the CEOs said they would change workplace safety measures, implement digital strategies, develop permanent remote work plans, and accelerate business process automation.

Many are willing to invest in data platforms, contactless payment, and artificial intelligence as 80% of the business leaders said they would increase technology and digital investments. Most plan to prioritize communication software.

The workplace is expected to change in response to the pandemic, with 73% of the business leaders saying that their organization could continue to have a work-from-home policy after the pandemic.

Meanwhile, 40% believe that there will be a reduction in office space over the next year.