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COVID-19 Impact On Micro, Small, and Medium-Sized Enterprises Under The Lockdown

The document analyzes the impact of COVID-19 on Micro, Small, and Medium-Sized Enterprises in the Philippines under lockdown. It discusses the initial impact on their sales, revenue, employment, wages and financial conditions. It also reviews the Philippine government's response and related studies that examined the economic losses and effects on employment and business sectors.

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27 views3 pages

COVID-19 Impact On Micro, Small, and Medium-Sized Enterprises Under The Lockdown

The document analyzes the impact of COVID-19 on Micro, Small, and Medium-Sized Enterprises in the Philippines under lockdown. It discusses the initial impact on their sales, revenue, employment, wages and financial conditions. It also reviews the Philippine government's response and related studies that examined the economic losses and effects on employment and business sectors.

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© © All Rights Reserved
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Title: COVID-19 Impact on Micro, Small, and Medium-Sized Enterprises under the Lockdown

Statement of the problem:


The study will analyze the impact of COVID-19 on the Micro, Small, and Medium-Sized
Enterprises (MSME) under the Lockdown. Furthermore, it seeks answer to the following
questions:

1. What is the initial impact on Micro, Small, and Medium-Sized Enterprises (MSME)
during the ECQ and lockdown?

2. How is the Philippine government responded during this situation?

3. How much did Philippines economic loss due to the COVID-19 pandemic?

4. How was the Employment during the COVID-19 Pandemic?

5. What is the Financial Condition during the COVID-19 Pandemic?

Scope and Limitation:


The purpose of this study is to assess the impact of COVID19 on these companies and to
provide policy recommendations to help MSME reduce business losses and survive the crisis.
This paper examines the initial one-month impact on MSMEs of the ECQ lockdown measures
imposed by the Philippines, using a multivariate analytical model, and presents policy
implications with evidence obtained through a rapid nationwide survey from the end of March
to mid-April 2020. It also reviews the initial policy responses to support MSMEs affected by the
COVID-19 in selected Asian economies. And it examines the methodology that the study used.
Discuss the profile of the surveyed MSMEs and the first month impact of the lockdown on
MSMEs’ sales, revenue, employment, wages, and financial conditions, followed by its policy
implications and a concluding section.

Significance of the Study:


The results of the study will be of great benefit to the following:

1. To know the financial condition during the COVID-19 pandemic.


2. To know how much is the impact on MSMEs during the ECQ and lockdown
3. To know the possible government policy options to support MSMEs’ needs.
4. To know the Impact on MSME Sales.
5. Be informed about the MSME’s employment experienced during the lockdown.

Related Literature
One of the great studies that shows the impact on Micro, Small, and Medium-Sized
Enterprises under the Lockdown is done by Asian Development Bank Institute (ADBI) in 2020.
This paper examined the initial 1-month impact on MSMEs in the Philippines after the ECQ or
lockdown began. It described the effect of the initial policy measures and some policy
implications with evidence obtained through the nationwide rapid survey conducted from the
end of March to mid-April 2020. The COVID-19 pandemic and lockdown measures created two
streams of business clusters—contracting firm groups that were devastated by the lockdown
and those that benefitted from the lockdown. The LPM regression identified the MSME groups
that were hurt most and those that benefited most. It found that education, construction,
accommodation and food services (including tourism), and manufacturing were hurt most;
power and energy, information and communication technology, and real estate coped better.
The findings of this paper addressed the importance of two policy approaches in the early stage
following the lockdown—timely identification of focus groups for assistance and differentiation
of policy measures by firm size (Shinozaki,et.al, 2021).

Another studies that is related to the study is the Philippine Institute for Development
Studies (Abrigo, et.al, 2020), that says that the Philippines may suffer economic losses between
P276.3 billion and P2.5 trillion due to the COVID-19 pandemic. The most affected business
sectors will be manufacturing, with losses between P82.1 billion and P855.2 billion, wholesale
and retail trade, with losses between P93.2 billion and P724.8 billion, and
transport/storage/communication, with losses between P11.7 billion and P124.3 billion. Abrigo
et al (2020) also estimated that, if the ECQ continued to May 2020, it would potentially cost the
Philippine economy at least P150 billion given the decline in household consumption.

According to the Recomposed from the World Bank’s “Map of SME-Support Measures in
Response to COVID-19.” In 2020, Central banks used several liquidity support measures to
facilitate banks’ lending to MSMEs and those sectors that COVID-19 and the quarantine
measures most affected, such as large-scale capital injections for commercial and policy banks
(for example, Cambodia, Indonesia, and the PRC), reduced base rates for lending (Cambodia,
the Philippines, the Republic of Korea, and Viet Nam), relaxed capital requirements for banks
(the Philippines), and related regulatory easing to stimulate MSME finance. Most countries
allowed the deferral of loan repayments and loan restructuring for MSMEs. Malaysia granted a
6-month moratorium on loan repayments, and the Philippines set a 30-day grace period for
loan repayments.

During the Lockdown there is an impact on the sales. The survey conducted by the ADBI
found that 59.9% of microenterprises had no sales in March 2020 due to the temporary closure
of business, followed by small firms (44.8%) and medium-sized firms (35.8%), suggesting a more
serious impact on microenterprises. MSMEs that operated continuously during the lockdown
faced a significant drop in sales: 27.7% of micro, 43.6% of small, and 41.0% of medium-sized
firms experienced a sales decrease of over 30% in March from February (the month before the
lockdown). All three industrial sectors—services, manufacturing, and agriculture—also had no
sales immediately after the lockdown (more than half of MSMEs in each sector). However,
some MSMEs had a sales increase due to special demand during the lockdown, such as retail
trade offering daily goods and food.

Generally, in most MSMEs, employment experienced no change during the first month
following the lockdown (65.7% of micro, 50.8% of small, and 66.3% of medium-sized firms)
(Figure 4), but MSMEs began laying off employees at a relatively early stage to survive (68.0% of
micro, 59.5% of small, and 78.6% of medium-sized firms), especially in manufacturing (69.4%)
and services (67.3%) (Figure 5). The larger the firm size, the more working options were
available. Among medium-sized firms, 41.1% reduced their employee working hours, followed
by 34.8% of small firms and 26.5% of microenterprises. Work-from-home was not a preferred
option for many MSMEs. Smaller firms had much more difficulty in introducing this
arrangement: 24.9% of medium-sized, 19.8% of small, and 11.3% of microenterprises
(Shinozaki,et.al, 2021).

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