The economic impact of COVID-19 on micro, small and medium enterprises | F&B Report

OCTOBER 27, 2022

According to a survey conducted by the Philippine Exporters Confederation Inc. (Philexport), the biggest economic problems micro, small and medium-size enterprises (MSMEs) are struggling with are the slowdown in market demand and the increasing cost of raw materials and intermediate goods. Over 70 percent of MSME exporters have traded with countries that are greatly impacted by the COVID-19 pandemic such as China, United States and Singapore.

Losses ranging from $35,000 to $500,000 have been recorded by Philexport. These are attributed to the imposition of international travel restrictions that caused late shipments, canceled import and export orders and loss of suppliers and buyers. In the 36-respondent survey representing 13 sectors such as food, logistics and electronics, newfound difficulties including complications in obtaining loans, delays in remittance of payments and cancellation of credit lines were reported. Abolished trade fairs, excess manpower and liquidation issues have also arisen. 

What export firms are expecting out of an intervention from the government are drastic measures concerning financial assistance. As the global health crisis alters one economy after the other, respondents were requesting support in the forms of tax breaks, loan assistance and refunds for postponed trade fairs. A review of the implementation of the red lane (x-ray requirement for exports) was also appealed for by the MSME participants. A respondent also commented that because the implementation was too sudden and affected parties weren’t consulted, they had to cover for the unnecessary fees the coronavirus outbreak has caused their operations.

Governments from other countries are employing programs for small businesses affected by the pandemic. Canada is offering its small employers a three-month wage subsidy, a $900 bi-weekly emergency care benefit for workers who need to stay home, and a deferral on tax filing for businesses. Meanwhile, Italy (now the epicenter of the pandemic with over 5,000 deaths) provides self-employed workers a monthly allowance of 600 euros for three months, a redundancy fund for companies with fewer than five employees to receive 50 percent of their wages and a 60 percent rent relief to shops. In China, local government policies include tax incentives, reduced loan rates and family and rent allowance.

In the Philippines, part of the previously announced P27.1 billion economic package is a loan allocation for MSMEs amounting to P1 billion. This will go to the Department of Trade and Industry’s (DTI) Pondo sa Pagbabago at Pag-asenso or P3 microfinancing program for lending to MSMEs. Under the program, loans from P5,000 to P200,000 could be extended without collateral and with an interest rate of no more than 2.5 percent. Trade secretary Ramon Lopez said that this alternative to the “5-6” lending system is successful with a 98 percent repayment rate. DTI is also currently looking for new sources for inputs and non-traditional markets to aid MSMEs whose operations are affected by the pandemic.

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