Around 40% of firms remain closed – World Bank survey

As pandemic drags on in H2

MANILA, Philippines — Around 40 percent of firms in the country remain closed at the start of the second semester, with most expressing a high degree of uncertainty in the months ahead, results of a business survey conducted by the World Bank with the government showed.

The Philippines COVID-19 Firm Survey conducted with the Department of Finance and the National Economic and Development Authority (NEDA) from July 7 to 14 builds on a large-scale government survey at the height of the lockdown in April.

It covered 74,031 firms nationwide spread across the agriculture, manufacturing and services sectors.

Results showed that the community quarantine measures continued to have substantial effects on the operations of businesses.

As of July, 40 percent of companies reported temporary suspension of their operations either voluntarily or because of government orders.

Around 15 percent of firms, meanwhile, reported to have closed permanently.

Reporting to have resumed operations were 45 percent of firms but only five percent operated at full capacity as of the survey period.

Despite the easing of community quarantine operations in June, firms reported a steep reduction in sales revenue, as much as 64 percent on average, between April and July. To cope with diminished earnings, half of the firms reported to have reduced payment to their employees or reduced the number of their workers.

To cope with mobility restrictions, firms turned to digital solutions for sales, marketing and payment.

Overall, the firms surveyed expressed a general pessimism about their operations, sales and level of employment for the next three months.

“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,” the report said.

Firms said the most useful form of government support would be those that would improve their liquidity such as cash transfers, subsidized interest rates, deferrals of loans, rentals and utility payments, as well as tax exemptions or reductions.

“These are aligned with the government’s proposed legislative interventions to reduce the corporate income tax rates and improve the liquidity in the financial sector,” the report said.

About one out of five firms received support from the national or local government, mainly in the form of cash transfers directly paid to employees.