The Philippine pandemic recovery remains uneven as lingering scars from the 2020 health crisis continue to drag on corporate profits and employment, according to a study by the state-run Philippine Institute for Development Studies (PIDS).

In a Jan. 20 discussion paper titled “Liquidity amid Lockdowns: Corporate Performance in the Philippines during the Global Pandemic,” researchers from PIDS highlighted that the health crisis triggered an unprecedented economic contraction—the steepest in Southeast Asia—after strict lockdowns beginning in March 2020 disrupted business activity. The measures led to revenue losses, closures, and widespread layoffs.

The report, authored by Marianne J. Rodriguez, John Paolo R. Rivera, Ivan Cenon V. Bernardo, Ramona Maria L. Miral, and Mark Gerald C. Ruiz, found that mandatory business closures significantly hurt corporate revenues. Firms that experienced full-year shutdowns saw annual income drop by about 65 percent, or roughly 5.4 percent for every month of closure.

PIDS said that liquidity-constrained firms experienced even larger declines, indicating that limited cash reserves reduced their ability to withstand prolonged closures.

While many firms eventually resumed operations, PIDS noted that revenues were often insufficient to justify rehiring or expanding workforces, with employment bearing much of the adjustment.

The think tank suggested this could reflect two scenarios: firms may have cut jobs to protect profit margins, or employment reductions may represent a post-pandemic adjustment to optimal workforce levels due to sectoral shifts and new business models that emerged during the crisis.

The study highlighted that non-tradable and non-essential firms suffered the sharpest declines in revenue, profits, and overall financial health, illustrating the uneven impact of lockdowns and demand shocks across sectors.

To mitigate such effects, PIDS stressed the importance of targeted, sector-specific support during crises. Firms in non-tradable, non-essential sectors—hardest hit by mobility and operational restrictions—require tailored liquidity assistance, wage support, or conditional grants rather than blanket interventions that primarily benefit less-affected firms.

Improving credit access for financially constrained firms was another key recommendation. PIDS suggested measures such as targeted loan moratoria, tax relief, lower policy rates, emergency lending facilities, and expanded collateral frameworks. Broader access to working capital and supplier financing can also help bridge liquidity gaps during future downturns.

Job losses hit mostly non-tradable sectors, while tradable firms raised compensation. PIDS stressed the need for targeted safety nets, labor mobility, reskilling, and digitalization to help firms weather future shocks.

As for sector and firm type, PIDS called on financial firms to ensure continued intermediation and liquidity provision during crises, while urging non-financial firms to prioritize boosting liquidity, adopting digital solutions, and taking advantage of tax deferrals.

Financially constrained firms were encouraged to expand access to collateral-free credit, supplier financing, and emergency grants. For financially unconstrained firms, PIDS recommended incentives for reinvestment in labor and innovation, such as matching grants or retooling subsidies.

The study offered sector-specific guidance: tradable firms should focus on facilitating trade and export incentives while ensuring logistics continuity, whereas non-tradable firms should aim to stimulate local demand through consumption incentives and mobility-safe business models.

Ultimately, PIDS concluded that a segmented, evidence-based approach can better align fiscal policies, financial regulation, and central banking measures, promoting a more inclusive and resilient recovery. This ensures that macroeconomic stability does not come at the expense of smaller firms, allowing both large companies and Micro, Small and Medium Enterprises (MSMEs) to access tailored support for growth.