Businesses remain pessimistic amid subdued sales

Published October 6, 2020, 3:13 PM

by Chino S. Leyco

Businesses are pessimistic about their operations in the short-term as sales revenue remained depressed despite the easing community quarantine, a survey commissioned by the government and World Bank revealed.

Based on the results from the Philippines COVID-19 firm survey, business owners claimed that their activities are expected to stay subdued for the next three-months, limiting their plans to put additional investment and hire workers.

The survey, conducted by the World Bank, Department of Finance, and National Economic and Development Authority, assessed the impact of COVID-19 on the operations of 74,031 companies in the country from July 7 to  14.

During that period, 40 percent of companies reported the temporary suspension of their operations, with 20 percent claimed that this is due to government order and 20 percent were voluntarily. About 15 percent, however, reported to have closed permanently. 

Businesses in the stricter community quarantine areas reported the highest levels of closures, with 70 percent in Cebu and 57 percent in Metro Manila, Calabarzon, and Central Luzon.

These closures were mainly in arts, entertainment, and recreation (82 percent) and tourism and accommodation (80 percent). Likewise, one out of five firms in these sectors, plus in the food services sector, has permanently closed.

While the government has substantially relaxed its quarantine measures since June, 89 percent of businesses still reported a deep reduction in sales revenue, which gone down by 64 percent on average between April and July.

“This was in addition to already significant loss by 65 percent experienced in March 2020 compared to February 2020, with 75 percent of firms reporting reduction in sales,” the survey results stated.

According to the survey, hardly any industry was spared by the pandemic, but lower sales were much significant in tourism and accommodation, as well as food services sectors. The revenues of automotive repairs were also down despite lesser operational disruptions.

Supply shocks also took a toll on businesses, with 70 percent reported of having their operations affected by a decrease in the availability of inputs and raw materials.

Similar to the demand shocks, companies outside of Metro Manila and firms in automotive repair and wholesale and retail trade sectors were more severely affected.

The most notable causes of supply shocks were local distributors (50 percent) and domestic suppliers (44 percent) having ceased or reduced operations.

Amid subdued business and consumer sentiment, one out of two companies reported that they decided to cut workers’ pay, while 48 percent claimed that they have cut jobs due to pandemic.

Job loss is most significant in the education, food services, and construction sectors, with greater than 60 percent of firms in these sectors having laid off their employees.

Meanwhile, 58 percent of small and medium enterprises (SMEs) and large firms, 63 percent of micro-sized companies have turned to digital solutions to adapt to the new normal. 

About 35 percent of these SMEs and large firms started using social media, specialized applications, or digital platforms in response to COVID-19, in addition to 23 percent having increased the use of these digital platforms.

Use of digital solutions was varied across sectors: electronics manufacturers (59 percent) and firms in the education sector (47 percent) were the top two most enthusiastic new adopters.

Business processing operations firms (55 percent) and accounting and legal services firms (48 percent) also intensified their use of digital solutions.

But despite a significant uptake of digital solutions, 70 percent of firms noted that less than 2 percent of their employees worked from home, mainly because the nature of work was not suited to home-based work.

Only 5 percent of companies noted that 90 percent or more of their employees worked from home.

Firms in the call center and other IT sectors were most suited to home-based work, with 20 percent of them reporting that 90 percent or more of their employees were working from home as of July.