THE easing of quarantine measures in July failed to save thousands of shops from closure, as one in 10 firms ceased operations for good after suffering from demand, supply and financial shocks induced by Covid-19.
In a survey by the World Bank, 15 percent of firms nationwide reported they will no longer open for business as of July. Even as quarantine restrictions were loosened that month, 40 percent stated they remained closed either by government order or on voluntary basis.
The poll also captured how the Covid-19 pandemic damaged the different industries, with arts and entertainment, tourism and food services posting the most number of permanent closures: 21 percent, 20 percent and 20 percent, respectively.
In terms of factors, about nine in 10 firms in July lamented their sales decreased at an average of 64 percent, adding up to their revenue loss in March of 65 percent. Most of those who took a beating in terms of earnings are located outside Metro Manila and are engaged in automotive repair, tourism and accommodation, food services and real estate.
“Reduced sales are linked to a higher-than-average rate of temporary and permanent closure of firms in the tourism and accommodation, and food services sectors,” the World Bank said.
Based on the survey, 75 percent of firms said demand for their products and services plunged in July, and at least one in three estimated the decline to be more than 50 percent. The demand shock was attributed to the lack of public transport that prohibited consumers from traveling to commercial areas to buy their goods and avail services.
Further, 70 percent reported their production dwindled on a shortage in the availability of inputs and raw materials from local distributors and suppliers.
Manufacturers pointed the supply issue to the disrupted work in the quarantine, as 50 percent of distributors and 44 percent of suppliers had to either cease operations or minimize capacity. Firms also argued that the movement restrictions enforced by the government impeded the transfer of their inputs and raw materials.
Worse, 86 percent of firms disclosed their cash flow went down alongside demand and supply, and 59 percent complained access to financial services lessened as well.
As a consequence, one in every two firms admitted they cut the salaries of their workers just to get by. Also, nearly half of them said they laid off a number of their employees to cope with the financial impact, with education, food service and construction industries posting the most job losses at over 60 percent.
“These shocks from the pandemic and containment measures have had significant implications for employment and the operating model of firms,” the World Bank said.
In adjusting to the new normal, majority of business owners turned to digital platforms to carry out sales, marketing and payment. However, 70 percent of them reported that below 2 percent of their employees worked from home, as the nature of their duties require them to be present in the workplace.
To manage the economic impact of the health crisis, the most sought forms of government assistance were: cash transfer, 46 percent; loans at subsidized rates, 36 percent; deferral or reduction of rent, mortgage or utilities, 22 percent; tax exemptions or reductions, 22 percent; and deferral of loan payments, 19 percent.
The World Bank survey gathered the insights of 74,031 firms across all regions between July 7 and July 14, a period when quarantine nationwide was leveled down, even in Metro Manila. By size, more than 91 percent of the respondents were micro, small and medium enterprises.
The World Bank collaborated with the Department of Finance and the National Economic and Development Authority in conducting the poll to understand how the pandemic affected private sector activity in the Philippines.
Image credits: Nonie Reyes