Crisis-stricken firms uncertain better days are coming

MANILA, Philippines — Local firms were not optimistic of a quick turnaround from the pandemic’s damage even after the economy reopened in July, painting a bleak picture for a broader recovery seen highly reliant on the private sector’s drive to pull itself up.

In a July 7-14 survey, results of which were only released Tuesday, the World Bank said 45% of 74,031 participating firms were unsure when to restart business after getting shuttered for 3 months by state-imposed movement restrictions to control the spread of coronavirus.

For those that immediately reopened, 39% “did not know how long” they could sustain operations, while 36% said they could only do so for the next 3 months, indicating the likelihood that they could have already shut down by now.

“Firms expressed a high degree of uncertainty and general pessimism about their operations, sales and employees for the next 3 months,” the World Bank said.

“Such lack of confidence will likely limit additional investment and employment, restraining firms’ growth. These suggest that business activities are expected to stay subdued for an extended period,” it added.

The survey, conducted with the government, highlighted the plight of local companies, 98% of which are small- and medium-sized enterprises whose smaller capital and workforce were insufficient to deal with unexpected disruptions from the pandemic.

On average, revenues of participating companies dropped 64% at the height of lockdowns between April and June, with a bigger 84% reportedly suffering a reduction in sales. Going forward, around a third of companies asked expect sales to decrease further.

As a result, nearly one in two firms – 48%-- were forced to lay off workers in the early months of lockdown, while 24% said they were likely to do so in the future, survey showed.

Tourism, entertainment sectors badly hit

By sector, businesses under the arts and entertainment segment suffered the largest closures, with 61% of respondents reportedly closing temporarily, while 21% was shuttered permanently. Sixty percent of tourism enterprises, meanwhile, were closed down for the time being, while a fifth permanently went out of business.

“Alongside failing demand and disrupted supply chains, firms faced a deterioration of their cash flow…The impact was most pronounced for firms in tourism and accommodation, and arts, entertainment and recreation sectors,” World Bank said.

“Job loss is most significant in the education, food services and construction sectors…,” it added.

By location, firms in Central Visayas, where Boracay Island that reopened this week is located, and in the Bangsamoro region saw a lower turnout in sales and employment.

To be fair, the World Bank noted that 1 in 5 firms surveyed received some form of government support, whether in cash subsidies, deferral of loan payments and even low interest rates from new bank credit, all of which were rolled out separately from March onwards. 

Still, some were asking for more assistance. For instance, 9% of the firms left out to bring their employees to work would have wanted the government to shoulder such costs, while 8% wanted trainings for the digital shift of their operations to better adopt to new work arrangements. Four percent also wanted deferral in tax payments, but did not get it.