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MANILA -The Philippine economy will remain on a recovery path in 2023, but it won’t be much of an improvement compared to prepandemic levels, and businesses need to shape up to be ready for the next possible episode of shocks, according to McKinsey & Co.
The US-based management consulting group said in a report that companies operating in the Philippines—especially those engaged in real estate; tourism; financial services; energy and health care—need to rethink how they deliver to customers and operate their businesses in anticipation of possible future disruptions.
The outlook report on the Philippines was penned by McKinsey partners Jon Canto and Kristine Romano, and consultants Danice Parel and Vicah Villanueva.
In their report, the team said local firms face challenges such as high interest rates, supply-chain issues, the push for interoperability and digitization, energy transition and global macroeconomic shocks.
“The outlook [for the Philippines this year] is complex,” they said. “There are serious issues to address, but also reasons for optimism.”
In the retail and construction industries, McKinsey said companies might be affected by the continuing monetary policy tightening as well as issues that beset the supply chain that, in turn, put upward pressure on prices and affect consumer demand.
However, other industries that are emerging as well as easing mobility restrictions are expected to support retail and construction, which are likely to experience continued recovery in 2023.
As for the travel and hospitality industry, the outlook for this year is stronger than for the airlines industry given the forecast that the Philippines’ tourism sector will return to pre-pandemic levels by 2024 thanks to domestic demand.
Pent-up demand for leisure travel is expected to outpace the recovery of business travel.
Meanwhile, financial services providers are seen to face headwinds from global macroeconomic shocks as well as regulators’ push for interoperability and digitization.
Energy companies are primed to enjoy a rebound this year after a slower growth in 2022, but the stronger push for transition to cleaner resources will dampen this outlook.
Potential challenges that the energy sector faces include rising oil and gas prices, supply-chain disruptions and the depreciation of the Philippine peso.
As for the healthcare sector, the outlook is mixed since the various subsectors have widely different market sizes and are subject to divergent growth trends.
Yet, overall, the entire healthcare sector is faced with rising inflation—especially driven by wage hikes—supply-chain disruptions and a high turnover of workers that might push down the quality of healthcare.
“Despite significant growth in 2022, the Philippines still has some catching up to do [but] big pockets of opportunity exist within each of its biggest sectors,” McKinsey said.
With business strategies adjusted “for possible future disruptions, the Philippines can stand strong and continue to grow its economy in the year ahead,” it added. INQ
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