The convergence of market dynamics, policy changes, and geopolitical tensions is forging a wave of cautious optimism among Asia-Pacific businesses. Following a period of spiraling costs of business and a significant drop in mergers and acquisitions (M&A) to multiyear lows in the region, the persistent challenges in the economy and of geopolitical uncertainties have dampened earlier expectations of faster recovery. Initially brimming with bullishness in early 2024, CEOs and investors are now recalibrating their forecasts to consider a more conservative view.
Reflecting the region's more measured outlook, the Philippines earlier revised its own GDP growth forecast to a more conservative 6-7%, down from the previous 6.5-7.5% projection. The National Economic and Development Authority (NEDA) also raised the budget deficit ceilings until 2028 to provide greater flexibility in funding government infrastructure programs.
Despite these headwinds, 55% of CEOs feel optimistic about their company’s revenue growth, and 61% remain confident in their profitability, as revealed by the latest 2024 EY CEO Outlook Pulse survey.
The report surveyed 340 CEOs and 100 institutional investors across Asia-Pacific and found that CEOs are reworking their strategic playbooks. From mere business expansion goals a year ago, businesses in the region are now zeroing in on strategic investments in innovation and sustainability to achieve long-term resilience and better prepare for the future.
However, while investors are keen to support genuine sustainability efforts, they also demand strategies that deliver long-term financial value. Achieving both the desired sustainability impact and positive financial benefits remains crucial to both CEOs and investors.
Here are the key findings from the survey, providing salient insights for Philippine businesses.
Competitive edge through technology and sustainability
With AI's potential to boost productivity and provide a competitive edge, over a third (39%) of Asia-Pacific CEOs are prioritizing advanced technology, including AI, in their strategies for the next 12 months.
To navigate the complexities of the digital landscape and ensure they reap the full benefits of advanced technologies, 35% of CEOs are also focusing investments in data management and robust cybersecurity. Over two-thirds of CEOs (68%) and investors (70%) believe that technology and AI can seamlessly bridge short-term financial goals with long-term sustainability.
Meanwhile, over the next three years, CEOs are focusing their agenda on sustainability, with 49% of CEOs now seeing it as even more critical than a year ago.
This shift to prioritize the green imperative rather than pay mere lip service is fueled by rising consumer demand for sustainable practices that extend beyond the point of sale. While consumers may balk at a "green premium," they still expect companies to implement comprehensive sustainability strategies across their supply chains.
Stronger push for greater government action
Asia-Pacific CEOs and investors stress the need for governments to take coordinated and consistent action to combat climate change, calling for greater infrastructure investments to spur regional growth and support the energy transition.
A key barrier they emphasized is the region's lack of sophisticated public-private partnerships and innovative funding models.
While many Asia-Pacific CEOs are pleased with current government infrastructure efforts, a vocal minority calls for more robust actions. They see subsidies, tax incentives, and direct investments as crucial for regional growth and energy transition, whereas mandatory reporting standards and financial penalties are less favored.
Moreover, Asia-Pacific CEOs show willingness to accept tighter profit margins and higher costs to protect domestic manufacturing, though their commitment to such sacrifices is more cautious compared to leaders in other regions.
M&As to accelerate transformation
Asia-Pacific CEOs are seizing new opportunities through mergers, acquisitions, divestitures, and strategic alliances to advance their transformation agendas.
Nearly all (99%) are planning or considering transactions this year, with 54% targeting mergers and acquisitions, far surpassing their counterparts in the Americas (36%) and Europe (40%).
To ensure that sustainability is not just a box to tick but a core component of their strategic growth plans, companies are embedding sustainability considerations into their M&A framework. This forward-thinking approach aligns with the triple bottom line principle, balancing people, planet, and profit for long-term success.
Three strategic actions
The following are strategic actions CEOs can take to balance immediate productivity and profitability goals with long-term imperatives to ensure sustainable business growth and climate action alignment:
Strength in numbers. By working together, e.g., by way of partnerships or strategic collaboration — particularly given the continuing challenges in the market — companies can have better access to the necessary funding and support from investors and governments to accelerate their transition toward more sustainable operations.
Pursue public-private partnerships. When governments are deciding sustainability policy, CEOs, as key stakeholders, must actively engage with them. They are well-informed and ideally placed to advise on the most effective mechanisms to support policy objectives while minimizing economic downsides.
Tell a better story. Investors are broadly positive about the outlook for dealmaking. However, they emphasize the need for companies to articulate why acquisition returns will surpass organic investments. They also want to see how integrated sustainability initiatives drive long-term value.
Given the need for APAC CEOs to balance short-term productivity and profitability with longer-term imperatives, close collaboration and dialogue between companies, investors and governments will be key to sustaining economic growth while also addressing climate risk concerns.
Noel P. Rabaja is the Strategy and Transactions Leader of SGV & Co.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.
