The present global economic landscape continues to pose challenges for mid-market firms in the Philippines with 52% of business leaders identifying economic uncertainty as a significant restraint to business growth according to the latest International Business Report (IBR) conducted by Grant Thornton International.
In the face of unpredictability and pervasive inflation, Philippine mid-market firms are demonstrating resilience and agility. These enterprises, considered as the backbone of the economy, are navigating the complexities of the current environment with a blend of creative innovation, adaptability, and a great deal of optimism for the foreseeable future.
Challenges and the call for innovation
The economic challenges faced by mid-market firms in the Philippines are multifaceted, ranging from labor costs to transport infrastructure. Due to the country’s high inflation rate, expected to stay elevated by the International Monetary Fund (IMF), consumer demand is greatly affected thereby resulting in growing concerns about shortage of finance for mid-market businesses. In a report by Reuters, the IMF expects Philippine inflation “to average close to 6.0% this year, before easing to close to 3.5% in 2024.”
IMF also added, “Thus, a higher-for-longer policy rate path is warranted until inflation firmly falls within the target range, alongside a tightening bias to anchor inflation expectations.”
The ongoing global shifts in trade dynamics and the aftermath of the recent health crisis have put these businesses to the test. However, many mid-market firms are turning adversity into opportunity. Recognizing that the traditional ways of doing business may no longer suffice, business leaders are embracing collaboration and increasing global trade ventures, improving investment intentions, and fostering a culture of innovation within their organizations.
Strategic leap forward with investment intentions
We are now in an era where innovation is more necessary than ever. The IBR reports that 74% of mid-market firms are leveraging research and development to streamline operations, upgrade product/services portfolio, and enhance customer experiences. Furthermore, to increase the adaptability of their human resources with the continuously evolving technologies, investment in staff skills remains a top priority for 66% of business leaders.
Investment in new buildings is also up for the next 12 months as “the Metro Manila office market net take-up saw a marginal rise this 2023,” according to Colliers Philippines. Joey Roi Bondoc, director at Colliers, said in a report, “The property sector is one of the key segments of the Philippine economy. It has tremendous multiplier effects which bode well for the country. Sub-segments such as office, residential, hotel, retail, and industrial are the sector’s major planks. Attracting more foreign investments into these sub-sectors is crucial to raising the Philippines’ stature as a major property investment in the Asia-Pacific region and ensuring that the country remains on the radar of foreign property investors.”
Growing property investment opportunities outside Metro Manila will also put the Philippines back on track as a prime destination for foreign property investment.
Embracing a global perspective
Collaboration and global trade are also playing a pivotal role in driving revenue growth and non-domestic expansion of the country’s mid-market firms. According to the IBR 2023, the Philippines is focusing on maintaining its outsourcing and supply chain with China.
Additionally, mid-market firms are expanding their strategic alliances with other countries they perceived possess great market opportunities such as Malaysia and Canada. This collaborative approach enables them to share resources, access new markets, and collectively tackle industry challenges to promote mutual growth.
Government support and opportunities
The Philippine government's recognition of the crucial role played by mid-market firms in the economy has resulted in the creation of supportive measures and policies such as the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) Act and House Bill 1171, or the “One Town, One Product (OTOP) Act.
In a recent Department of Trade and Industry event, House of Representatives Speaker Ferdinand Martin G. Romualdez reiterated the government’s commitment to help these enterprises towards recovery by providing the necessary tools and conducive environment for their success.
Optimism paves the way for better economic recovery
The IMF stated that the Philippine economy is projected to experience a 6.0% expansion next year, “faster than its previous estimate of 5.5%.” In the face of economic uncertainties, mid-market firms are not merely adapting to survive; they are innovating to thrive. Innovation and adaptation are proving to be their lifelines amid the current economic challenges.
Having the ability to innovate and adapt is only possible through collaboration. The diversity of expertise present in the business landscape serves to underscore the importance of partnership and synergy to thrive in today’s economy. Seeking external advisory services can help businesses innovate through strategic guidance on adapting to the evolving market landscape, reimagining the positive contributions of technological advancements and implementing them, and optimizing operations and business models for agile adaptation. Additionally, financial consulting can aid in securing funding, revenue growth, and managing resources effectively during the post-pandemic recovery.
An optimistic outlook drives businesses to action and focusing on opportunities for improvement can empower them to navigate economic uncertainties and diverse challenges, positioning themselves for sustained growth in 2024.
As published in The Manila Times, dated 13 December 2023
