Micro, small and medium enterprises (MSME) account for more than 90% of enterprises in the Philippines. It follows, according to the think tank Moody’s Analytics, that they would suffer more from the prolonged economic recovery from the pandemic, aggravating the difficulties they have suffered since the onset of the recession last year.
According to the nicknamed assessment of Moody’s Analytics chief economist Steven Cochrane in his recent report entitled “APAC Outlook: The Long and Winding Road”: “The recovery will be longer, especially if tax support has been modest.” as in Indonesia, the Philippines and Thailand, there are more chances of long-term healing. And that could be particularly evident among industries with a large proportion of small and medium-sized businesses. “
The government has extended wage subsidies to workers and offered loans to help small and medium-sized businesses survive, but, as Moody’s noted, fiscal stimulus has been scarce despite the government incurring global debts to contain the pandemic. and pay for measures to mitigate public and economic health. crisis.
One of the indicators of the adverse impact of the pandemic on SMEs is the increase in the number of workers in the sector who have lost their jobs. The state planning agency of the National Economic and Development Authority revealed that despite the declining unemployment rate in March, the Philippines remained the worst emerging labor market in Asia with most of the active unemployed population.
The government reported an unemployment rate of 7.1% in March this year. It was the lowest since April 2020, when the unemployment rate hit a record 17.6 percent, equivalent to 7.2 million unemployed Filipinos, as two-thirds of the economy went close from mid-March to May as part of the longest and strictest closure of COVID-19. in the region. However, the national capital region and nearby provinces returned to enhanced community quarantine (ECQ) for two weeks and then to the modified ECQ in April this year, which could reverse employment gains achieved as of March 2021.
The general economy must grow for MSMEs to recover in some way. But private economists are pessimistic. Moody’s expects the Philippines’ GDP to grow just 5.3 percent this year, below the government’s target, due to rising inflation and expectations that the high unemployment rate will persist. The Philippines, he said, “remains sluggish with the transition from the third quarter of 2022 to expansion, as it suffers from problems on many fronts, such as lack of effective testing and tracking, even during extended quarantine periods. and very strict ones that still remain in Metro Manila. and neighboring provinces “. The difficult environment is complicated by other issues, such as “modest support for Philippine fiscal policy and fewer links to export markets in China and elsewhere.”
The problem of tax support is manifested in the long-awaited delay in approving the Duterte administration’s stimulus plan called Bayanihan 3 or Bill no. 9411 (Bayanihan to Arise as One). It could pass its third and final reading in the House of Representatives this week, but its Senate-approved measure has not been advanced and Congress is due to adjourn June 5.
The 40 billion P40 assistance package is trying to give two cash grants of 1,000 euros each to every Filipino to help alleviate their financial pains due to the pandemic. It also allocates 20 billion in wage subsidies to workers and 25 billion to help displaced or disadvantaged workers. Wage subsidies for skilled workers in SMEs are set at between 5,000 and 8,000.
The amounts may not be enough to help everyone in the MSME sector, but at the moment they are better than getting nothing. Entrepreneurs, on the other hand, will need more than just financial help from the government. Consumer demand, the lifeline of these companies, must begin to recover. However, the sector will only see signs of renewed life when the whole economy starts to accelerate and start generating employment and consumer spending once again. Although the COVID-19 cases have eased slightly, the country is certainly not out of the woods and the government will have to continue fighting with ways to reopen certain segments of the economy, in particular tourism and construction (two industries with high employment generation). , without putting the fragile health system back in the critical area and in the economic centers in severe blockade mode.
If there is no adequate and timely relief for small and medium-sized businesses, while the economy struggles to find its footing, there is only so much that the country’s entrepreneurs can take before they are forced to throw in the towel. The spectrum of “long-term healing” is an impact that neither the sector nor the larger economy can afford.
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