Eight months since COVID-19 was declared a pandemic by the World Health Organization, nations across the world continue to struggle with a global economic downturn, one that the International Monetary Fund (IMF) says has been the worst since the Great Depression.
The Philippine economy was sent into a tailspin, with the gross domestic product plunging by 16.5 percent as work and business activity drastically slowed down amid efforts to control the infection. As such, the Philippines remains the economically worst-hit country in Southeast Asia, according to the IMF, who predicts the economy’s value to dive by 8.3 percent for 2020.
Although lawmakers hoped for a quick “V-shaped” recovery as late as June, underwhelming developments in the past few months hint that for many Filipinos, the road to recovery will be long and arduous.
Keeping the reins on
Although the economy is gradually reopening by loosening quarantine restrictions, the country is still in a crawl to regain its footing after the economic shock it faced earlier this year. The Philippine Statistics Authority reported an economic contraction of 11.5 percent for the third quarter of 2020, beating relatively optimistic projections for a contraction of 11.2 percent at worst. The IMF foresees positive growth to return in 2021 at a rate of 7.4 percent for the entire year.
While unemployment decreased to 10 percent in July from the 17.7 percent recorded in April, it still accounts for 4.6 million jobless Filipinos. National debt, however, is still on the uptick; latest figures released by the Bureau of the Treasury last September put national debt levels at about P9.37 trillion at the end of September.
Nonetheless, Dr. Leonardo Lanzona Jr., who teaches Economics at Ateneo de Manila University and specializes in Development Economics, stresses that debt is the least of the nation’s concerns. “It’s not a financial crisis,” he emphasizes. “It’s a health crisis and it should be addressed as such.”
To deal with this issue, the country has to spend more on social support, stimulus programs, and health systems, he argues, as they give the country a better chance of addressing the health crisis sooner and allow the economy to recover.
Lanzona advises that instead of worrying about money, greater attention must be given to the government’s containment strategies “to make sure that the money that we are using—especially [since] these are borrowed money—[is] going to be effective for the recovery.”
Steep climb upward
Amid recovery efforts, Lanzona and fellow economists see the country trekking toward a slower “U-shaped” recovery—a sharp decline, followed by a prolonged recession, and then a swift rebound. Months of quarantine measures have already led to business closures and mass worker lay-offs, both of which Lanzona cites as contributing factors to the slower recovery.
To keep the Philippine business sector afloat, support for Micro, Small, and Medium Enterprises (MSMEs) is critical, but Lanzona admits that it is not possible to save all enterprises and that some will have to go.
Instead, he recommends that social assistance be directed to households, which in turn helps keep financial pressure off household enterprises. “We should be saving the workers, the people who constitute these enterprises,” he explains.
According to figures from the Department of Trade and Industry (DTI), MSMEs provided 62 percent of the nation’s total employment or some 5.5 million jobs in 2019. Apart from hosting much of the Philippines’ industrial hubs, Metro Manila, CALABARZON, and Central Luzon also host about 46.6 percent of MSMEs nationwide.
With recovery gaining momentum, Lanzona suggests that “stimulus programs” be put in place in other regions for sectors such as agriculture to disperse the country’s economic base. This, he explains, is a step to reducing the economy’s “overdependence” on Metro Manila, which remains under strict quarantine measures.
Connecting for survival
For many business owners, however, relief came in October as the third phase of the government’s transition plan into the new normal saw loosened restrictions. Under this phase, businesses such as malls, non-food retailers, and a number of professional services, are now allowed to operate at full capacity.
While national officials and socioeconomic planners grapple with creating a conducive business environment, business owners have to face their own struggles on the ground.
DLSU Decision Sciences and Innovation (DSI) Department Assistant Professor Junius Yu narrates that the COVID-19 pandemic has forced brick-and-mortar stores to make a “jumpstart” into e-commerce, in contrast to the “gradual shift” other stores went through prior to the pandemic.
For enterprises still fighting an uphill battle to survive, online channels are now lifelines. The DTI reported that more than 75,000 online businesses are now registered with the agency as of September; in March, there were only 1,753.
Alongside the shift to online selling, logistics will take emphasis as quarantine measures hinder product distribution. “Let’s say food [establishments] would open, but they would probably [only serve customers] through takeout or home deliveries,” Yu explains, noting that this need for transporting goods would create further opportunities for courier services.
Demand for alternative and digital payment systems are also set to continue their steep climb in the coming months as cash-based transactions remain limited. Yu believes that this demand also opens opportunities for other entrepreneurs. “New payment systems might grow. It no longer will be just [GCash]…New applications or new businesses might [open]; that will make things easier for consumers and for other businesses,” he adds.
Securing ground
With new entrepreneurs finding their place in the market, however, competition may once again rise and new businesses may find themselves closing shop sooner.
Reynaldo Mones, an Assistant Prof. Lecturer from the DSI Department who specializes in entrepreneurship and small business management, explains that neophyte entrepreneurs put up online businesses as a “spur of the moment” decision amid a “mad scramble for survival”. As a result, fledgling enterprises often offer similar products or services, which makes it challenging to stand out in an already saturated market.
Mones advises new small business owners, who he says are mostly selling food, to “go [back] to the drawing board” for strategic planning, an important step that might have been missed during the initial rush to pivot business operations. “[Entrepreneurs] need to plan, on top of innovating, to make their businesses sustainable and competitive,” he says.
As business leaders across different economic sectors make a concurrent push to rebuild, it still behooves national leaders to lay a solid framework for health systems and the economy as the nation heads toward 2021.
“It’s not a choice between lockdown and the economy…We [must] make sure that we protect our health—and presumably, the economy will follow,” assures Lanzona.
