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CEO optimism up amid pandemic

A SURVEY showed that 63% of CEOs are confident about their organization’s revenue growth for the next 12 months. —

By Jenina P. Ibañez, Reporter

MORE THAN THREE-FIFTHS of Philippine chief executive officers (CEOs) are confident about their revenue growth prospects over the next year, a slight improvement from last year’s business outlook that was clouded by the coronavirus pandemic, a survey conducted by PwC Philippines-Management Association of the Philippines (MAP) showed.   

Results of the survey of 131 CEOs in April and May showed that 63% are confident about their organization’s revenue growth for the next 12 months, although only 23% are “very confident” and 40% are “somewhat confident.”

This year’s midyear survey was released on Thursday, instead of September as in previous years. Last year, 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% in 2019.

CEO confidence could be attributed to business adjustments towards the end of last year, PwC Philippines Deals and Corporate Finance Managing Partner Jade Roxas-Divinagracia said during the virtual launch.

“I think in the middle of last year, amidst all the uncertainties, CEOs took a more conservative position, providing for possible losses and really anticipating the worst. But towards the end of last year, businesses who were able to adjust their strategies and operations much quicker were actually realizing that things are not as bad as they initially thought,” she said.

But Ms. Roxas-Divinagracia also noted that most of the CEOs that responded to the survey represent well-capitalized large corporations that have longer cash runways.

Majority of Philippine firms are micro-, small-, and medium-sized enterprises.

More than 62% of survey respondents represent large firms, with respondents from the financial services, manufacturing, transport and logistics, real estate, professional services, and technology sectors.

CEOs are more positive about growth in the succeeding years, with 85% responding that they are confident about revenue growth over the next three years.

Around 70% said they are optimistic about the recovery of the Philippine economy within the next three years, with 28% saying that recovery will happen within two years.

Philippine gross domestic product contracted by a record 9.6% last year amid long lockdowns declared to arrest the spread of the coronavirus disease 2019 (COVID-19).

Around 42% of surveyed CEOs believe the economy will grow by at least 3% this year. This is well-below the government’s 6-7% GDP growth target for 2021.

Industry growth confidence varied across sectors. While 100% of food and beverage firm CEOs are “very confident” about the sector’s revenue growth over the next 12 months, just half of telecommunications CEOs are “somewhat confident” while the other half are not confident at all.

In the consumer and retail sector, 67% are “somewhat confident,” while 83% of CEOs in the financial services sector are confident.

Many firms said they saw losses due to the pandemic, with 73% saying that they still expect revenue losses in 2021. Less than 10% of the firms surveyed expect up to 10% in revenue losses, while 18% expect 10-20% in losses. A quarter expect more than 20% in revenue losses.

Major factors that contributed to losses in 2020 include lower sales as customers were badly affected by the pandemic, store closures, and supply chain concerns.

Up to 84% of the CEOs said their employees were infected with COVID-19. Almost 70% expect their workforce to be fully vaccinated against COVID-19 this year.

Looking forward, more than half of the business leaders plan to set up more sustainable practices and launch more products and services in the next 12 months. Almost half plan to explore new market channels.

Around 70% of the CEOs have no fundraising plans, while just 15% are considering bank loans or financing.

“This is despite the fact that many of the CEOs — more than 50% of them — say that their cash runway is only up to six months, and a few of them have cash runways of more than 12 months. But they are not looking at raising finance… what is really happening now is they are looking for partners, and there’s a lot of action now happening in the M&A (mergers and acquisitions) space,” PwC Philippines Chairman and Senior Partner Alexander B. Cabrera said.

After businesses shifted to work-from-home operations during the lockdown, 67% of CEOs said they will retain remote work policies even after the pandemic. Among them, 51% said that up to a quarter of their workforce can work from home permanently.

To assist industry recovery, 79% said that the government should have an effective and equitable vaccination program, while 45% said the government should introduce tax incentives.

Meanwhile, a separate survey conducted by market research firm IPSOS last June showed a huge improvement in the economic outlook among Filipinos.

In the IPSOS survey, around 51% of Filipino respondents described the current economic situation to be either “somewhat good” or “very good.” This was 25 percentage points higher than the 26% recorded in a survey conducted in February, as well as the biggest increase among the six Southeast Asian economies included in the report.   

The positive view among Filipinos on the current state of the economy outmatched those of citizens in Thailand (20%), Malaysia (30%), and Indonesia (41%). Only Singapore (63%) and Vietnam (62%) saw higher positive responses.

Moreover, the survey reported similar results among Filipino respondents when asked on their economic outlook. Of these, 62% said they expect the country’s economic situation to be “somewhat stronger” or “much stronger” in the next six months — up from the 49% recorded in the survey in February. Only Indonesia (68%) posted a higher level of optimism.

IPSOS noted the Philippines and Vietnam as being the most positive about the future of their economies, while others “remain cautiously optimistic.”

The market research firm also asked respondents to pick the three most important areas for businesses to address. The following areas tallied the highest responses among Filipinos: keeping employees/customers safe from the coronavirus pandemic (51%), paying fair wages to employees (44%), controlling prices of products and services (43%), contributing to local economy through creation of jobs (43%), and supporting local economy by buying from local sellers (30%).   

IPSOS said the survey looks to understand “evolving consumer opinions and behaviors” in the six Southeast Asian markets amid the ongoing coronavirus pandemic. A tracking survey, it was first conducted in May 2020 and is currently on its fourth round in June.

“This study enables organizations and businesses to look ahead beyond the pandemic — anticipating future consumer behavior, patterns and opinions while each market in the region goes through various phases of crisis management, recovery, and vaccination rollouts,” IPSOS said.

The survey has 3,000 respondents aged 18 years and older with 500 representing each country. – with Bernadette Therese M. Gadon