MICRO, SMALL, and medium enterprises (MSMEs) have suffered from disrupted cash flow, skeletal workforces, and strict quarantine restrictions during the pandemic. Out of 1.5 million MSMEs, 26% were unable to maintain operations and temporarily closed down. Their struggles only worsened as the economic recovery has been slow, with lawmakers opting for a meager fiscal stimulus package.

More than a year into the pandemic, there are hopeful signs as vaccination rollout began prioritizing economic frontliners. Businesses also received a quick reprieve when lockdowns downgraded to milder classifications in July. However, uncertainty still remains as limited vaccine supplies, the emergence of the Delta variant, and recurring lockdowns cast a shadow over the road to recovery.

Wholly unprepared 

Le Fleur Cafe Owner Chelsea Ann Quiambao has encountered many challenges since her start-up business resumed operations last January after being closed for eight months. “Ang store mo is open, close, close, open…Yung ibang store hindi na nila kinakaya lumaban so nagclose na sila (Your store opens and closes. Other stores could not afford to resume their business so they had to close),” ​​Quiambao lamented.

Aside from erratic operations, labor was also a top concern. At the onset of the pandemic, the cafe paid its employees two months’ advance salary, which was a big burden for the business since it was not earning then. Laying off employees was unfortunately unavoidable. ​​Quiambao described the decision of reducing her staff from five workers to three as extremely difficult. “Masakit sa puso na magtanggal ng staff, kaya lang we have no choice (It’s hard to relieve some of our staff but we have no choice),” she added.

When the cafe was finally allowed to operate at 20% capacity during enhanced community quarantine (ECQ), shifting to takeouts and deliveries was a struggle as packaging required a separate budget. ​​Quiambao tried to boost deliveries through food delivery apps like GrabFood and Foodpanda, but found the 25% to 30% commission fee too costly. 

While MSMEs like Le Fleur Cafe attempt to adapt to the changing business landscape, the uncontrollable nature of the new normal leaves them at the mercy of recurring lockdowns and conservative economic policies.

Scraping by 

With millions suffering from unemployment and underemployment, the Philippines’ economic managers have enacted various recovery measures to prop up the economy. The Bayanihan to Heal as One Act allocated Php 200 billion for its emergency subsidy program (ESP), covering 18 million households. The Php 5,000 to 8,000 grant per household or ayuda was meant to be distributed in two tranches. However, distribution was delayed due to corruption and inefficiency at various government levels, with over 900,000 families receiving no aid by as late as of August 2020.

The ESP was followed by the Bayanihan to Recover as One Act, which granted low-interest loans to MSMEs and a 60-day grace period for outstanding loans due on or before December 31, 2020. Without consumer demand and economic activity to necessitate these loans, however, many MSMEs did not avail of these, leaving around 70% of the Php 10 billion budget untapped.

Overall, the largely conservative fiscal policies hindered economic and social recovery, Ateneo de Manila University Economics Professor Joseph Anthony Lim, PhD said. According to Lim, this is because economic managers wish to maintain the country’s credit rating from agencies such as Fitch, Moody’s, and S&P. If the Philippines borrows too much to fund fiscal stimuli, its creditworthiness will downgrade and other countries will be discouraged from accepting its loan requests.

This conservatism also restricted the ratification of the Accelerated Recovery and Investments Stimulus for the Economy (ARISE) Act. The bill was designed to stimulate the economy by doling cash loans out to MSMEs, creating jobs through infrastructure projects, and subsidizing workers’ mass testing. However, the bill was eventually killed, as economic managers claimed there were no revenues to support its Php 1.3 trillion budget.

The ARISE Act was instead replaced by the Corporate Recover and Tax Incentives for Enterprises (CREATE) Act, which reduces corporate income tax. However, Lim argued that reducing taxes is counterproductive, as tax cuts only detract from much-needed government revenues that could be used as fiscal stimulus. “​​In other words, why take out the taxes when you can use the taxes for ayuda?” he explained.

Road to recovery

With fiscal policies unable to assuage the downturn in economic activity, hopes for a return to pre-pandemic productivity have been threatened by recurring lockdowns. The country has exited a recession with a 9.8% growth in its Gross Domestic Product in the second quarter of 2021, but progress may be impeded or even negated without the assurance of public health.

The advent of the Delta variant has impacted already shaken consumer confidence. Quiambao anticipates yet another drop in sales, sharing, “Kukonti ang mga dine-in guests, and sa deliveries naman, magiging mahina, kasi syempre, yung iba wala sila talagang income. (Less people will dine in, and the deliveries will weaken, too, because some have no income.)” 

Her immediate hope for Le Fleur Cafe is that food delivery apps can become more accessible to small enterprises, and businesses can be given time to prepare for lockdowns before they are implemented.

Both Quiambao and Lim agreed that an efficient vaccination rollout is paramount. “The economics just follow [the country’s health]… [Stopping COVID-19 is] the only solution so far, whether through vaccination, contact tracing, or a combination of these,” Lim expressed.

He also stressed that the economy cannot recover if people have no money in the first place, thus necessitating sufficient ayuda now more than ever. “Of course there is a lot of corruption there, which can be [manifested in] tardiness, late payments when people are already starving. Those can be corrected sana.”