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The easing of quarantine measures in July failed to save thousands of stores from closure, as one in 10 companies permanently stopped operating after suffering the financial, demand and supply crises induced by Covid-19.
In a World Bank survey, 15 percent of businesses nationwide reported that they will no longer open their doors starting in July. Even when quarantine restrictions were loosened that month, 40 percent declared they remained closed either by government order or voluntarily.
The survey also captured how the Covid-19 pandemic damaged different industries, with arts and entertainment, tourism, and food services recording the highest number of permanent closures: 21 percent, 20 percent, and 20 percent. , respectively.
In terms of factors, about nine out of 10 companies in July lamented that their sales declined to an average of 64 percent, adding to the revenue loss in March of 65 percent. Most of those who took a beating in terms of income are outside of Metro Manila and are in auto repair, tourism and accommodation, food services and real estate.
“The reduced sales are linked to a higher than average rate of temporary and permanent closure of businesses in the tourism and accommodation sectors, and food services,” said the World Bank.
According to the survey, 75 percent of companies said demand for their products and services plummeted in July, with at least one in three estimating the decline to be more than 50 percent. The demand shock was attributed to the lack of public transportation that prohibited consumers from traveling to commercial areas to purchase their goods and take advantage of services.
In addition, 70 percent reported that their production decreased due to a shortage in the availability of inputs and raw materials from local distributors and suppliers.
Manufacturers pointed to the problem of supply to work interrupted in quarantine, as 50 percent of distributors and 44 percent of suppliers had to suspend their operations or minimize capacity. The companies also argued that government-imposed movement restrictions prevented the transfer of their inputs and raw materials.
Worse still, 86 percent of companies disclosed that their cash flow declined along with supply and demand, and 59 percent also complained about access to financial services.
As a result, one in two companies admitted that they cut their workers’ wages just to survive. In addition, nearly half of them said they laid off several of their employees to cope with the financial shock, with the education, food service and construction industries seeing the most jobs lost at more than 60 percent.
“These pandemic shocks and containment measures have had significant implications for employment and the business operating model,” the World Bank said.
To adapt to the new normal, most entrepreneurs turned to digital platforms for sales, marketing and payments. However, 70 percent of them reported that less than 2 percent of their employees worked from home, as the nature of their duties requires that they be present at the workplace.
To manage the economic impact of the health crisis, the most requested forms of government assistance were: cash transfers, 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 collected insights from 74,031 companies in all regions between July 7 and 14, a period in which quarantine was lowered across the country, including in Metro Manila. By size, more than 91 percent of the respondents were micro, small and medium-sized businesses.
The World Bank collaborated with the Department of Finance and the National Economic and Development Authority in conducting the survey to understand how the pandemic affected private sector activity in the Philippines.
