Firms need to reset plans amid Middle East disruption — Oundjian

Hinzugefügt: 2026-05-28

[00:00:00]Saying in your report we've moved from an acute event to a new operating environment. So, what exactly does living with volatility as a steady state mean for corporates in say the next 6 to 12 months? Yes, I think it's very clear that what we've seen appearing a bit out of the blue a few months ago is now really embedding in our lives and changing many many things for the Filipinos but also for the corporations. So, there've been channels of transmission of this shock that was initially just an energy shock to now the broader inflation to the broader currency and interest rate. And this is translating into a new normal. For corporations that had built their plans based on different set of forecasts, outdated forecasts, it means a reset. It means a reset for their energy plan. It means a reset for their growth and pricing plans. So, that's the kind of conversation we're having. It's it's going to be an interesting reset because I looked at the four transmission channels and if we can just pull that up, we actually check all the boxes and that's that's not pretty good. You've got energy costs, inflation and effects, OFW remittances, shipping and supply chains. That's all four that corporates will have to deal with. When you compare us with the rest of the ASEAN, the likes of maybe Indonesia, Thailand, Vietnam, how much worse are in a position are we when we talk about the structural um maybe conditions that Philippine corporates face. So, I think if you look at these four, I think two or three of them you would argue are similar. The energy cost is impacting everyone. The if you look at the effects, Indonesia has been meaningfully impacted. But if you look at the other two, I think in a way we're over indexing. We have the highest share of OFWs. We have 18% of our OFW remittances coming from the six countries in the Middle East. This is more than any of our peer countries. This represent a meaningful flow. If you look at supply chain, we are we are country of many islands.

[00:02:02]Indonesia has a similar context, but not Vietnam, not Thailand and others. So, we are in indeed in the in a very challenging situation across this period.

[00:02:12]>> situation when you come to think of the OFWs, the thousands have come home from the Middle East, repatriated because of the Middle East conflict. I know you've done up a report on OFWs. So, that that we have globally, but that came before the Middle East conflict. What insights do you now have of those that have come back to the Philippines and those who have stayed and the contribution they still continue to make given that the peso's fallen to a record. That's that's the major metric that's really changed from 13 weeks out. Absolutely. And you mentioned the ones who came back, which I think are the four, five thousand plus and there are more coming back, but also 40,000 people who are stranded in Manila, who are due to depart and have not departed. And there is a lagging impact on our economy because it takes a couple of months for the remittances of these people to hit back the shore of our country. So, we will expect to see the full impact in probably Q2 and Q3 of these people. I think these are also each time very personal stories, like stories of people relying on them to to you know, for the family, but also for the education of the children, etc. So, this is something that is impacting the Filipinos really on the daily basis. And the peso decline, is that impacting in a positive way for all the OFWs still out there contributing those remittances?

[00:03:31]So, there is a slightly positive effect of that for the countries where the currency is stronger than the peso, but I think it is not fully offsetting the impact of what I was just describing before. It's not. So, there's really a shortening window there for corporates as you mentioned Q3, Q4. What then can corporates do to um buffer themselves or protect their businesses. So, I always describe the reactions of for businesses in case of sudden shock similar to when you get punched in the face. So, the first reaction when you get punched in the face is to absorb the shock, right? To show resilience and to get back on your feet. That's what they've done by taking stock sometime of what was happening, making quick decisions so that they they, you know, they're in position to do the next move. The next move is, you know, getting your act together and re-planning. This is what they are doing in the in this current window of 60 to 90 days.

[00:04:26]So, many corporates, at least the one who are visionaries, have already realigned their plans for the year. They have they factored in what it means for their cost structure, what it means for the demand, and realigned such things, for example, as pricing or maybe a CapEx plans.

[00:04:42]Then, the one who are prepared are already planning for the long-term in the new normal that we are discussing before. We are not going to go back to the situation we were 6 months ago.

[00:04:52]Neither probably in the short term for energy prices, but also the confidence in the supply chain is different. So, people are looking at how to diversify their risk, at building geopolitical muscles, and to prepare their business to win in 6 to 9 months.

[00:05:09]>> But, are there sectors that are invariably more impacted and, you know, getting punched in the face, not being able to recover because they're in industries that have a major major exposure to energy costs, as well as maybe increasing debt servicing costs and and shrinking profit margins?

[00:05:27]>> I think there are a couple. I think the the energy company, some of them can be extremely challenged, and I think they have to look at their portfolio.

[00:05:35]First, they can work on their CapEx plan, but also look at their debt profile and what needs to be done. I will add also the airlines. When you're an airline today, it's disrupted, and even though you're not necessarily serving the Middle East, of course, you're very impacted by the high price of of fuel. What about those interest rate sensitive companies and sectors? I'm thinking about maybe the banks, financials, so they have to deal with higher interest rates now that the Banco Central is trying to quell faster inflationary pressures. I think it was interesting to read the print of the Q1 result for the leading bank in the Philippines. These were strong results on the back of already good momentum last year and of course the first 2 months of the year. But even though they had good results, you can read the signals of more caution on how they lend. They could see you could understand that this higher interest rate is going to impact the NPLs probably in the mid to longer term. So, they are realigning a bit their profile.

[00:06:29]I think our banks are very robust in the Philippines, but that's a indeed a different environment for them as well.

[00:06:34]Let's let's uh put some science into that. You just made a mention of what to look at maybe on a week-by-week basis and look at the scenarios. You've laid out three scenarios uh from de-escalation to prolonged disruption and structural closure. Of course, we don't want to get to structural closure, but how do we work with maybe corporates in these different scenarios? As we have a lot of unknowns yet because straight are moves still a big big question mark.

[00:07:00]Absolutely. So, when you live in uncertainty, you have to work with scenarios.

[00:07:04]And we've been looking at these scenarios from the beginning and each time trying to calibrate the probability and the implications. So, of course, there is still a good chance of quick de-escalation. I think we all hope hope for that, but the chance are probably in the 15-20%.

[00:07:19]And that scenario that will lead to the brand going back to the 70-85 uh dollar level.

[00:07:27]That's a scenario where you will get inflation down below the current forecast and the pesos back to the 57-58.

[00:07:35]There is still a possibility and we think some development over the last few days that give some hope. There is a base case scenario which I think people use as a reference, which is uh we call it the prolonged disruption. And prolonged doesn't mean it get worse. It means that it stabilize and there are moments where it gets better and some moments of spikes. And this is probably the scenario scenario we're in right now with the pesos probably hovering in the 61-62.

[00:08:01]Uh and further tightening from the central bank. And uh this is uh where also the brand will stay at the high level. And we mentioned always the brand, but the gas that we just discussed with your previous guest is also something that's going to stay probably high for for foreseeable future. Elisa, as you say, the new normal, isn't it? Well, thank you so much for the insights, Anthony. I much appreciate it. Anthony Ounjian of Boston Consulting Group.