The Philippine Chamber of Commerce and Industry (PCCI) has called on the government to prioritize the recovery of small businesses as it continues to address the economic scarring from the pandemic.
PCCI Secretary General Ruben Pascual said this will “ensure the long term growth potential of the country”, noting the micro, small and medium enterprises (MSMEs) comprise 99 percent of all businesses and account for 70 percent of total employment.
“One of the most heavily affected sectors by the pandemic are the MSMEs which suffered from shutdowns and business closures,” he said in a webinar organized by the Philippine Institute for Development Studies (PIDS).
This, as authors of a PIDS study project the country’s gross domestic product (GDP) to decelerate to 4.5 to 5.5 percent this year amid external headwinds and elevated inflation rate.
This is lower than the government’s original growth forecast for GDP of 6.5 to 8 percent and even its revised 6 to 7 percent, also considering external headwinds such as the slowdown in major advanced economies.
The Philippine economy expanded by 7.6 percent last year.
PIDS senior research fellow Dr. Margarita Debuque-Gonzales, who presented the study, said the business environment has become more challenging due to higher financing and business costs and economic uncertainty.
“Businesses are still recovering from the pandemic and may be more cautious given a new political leadership. Recent reforms to liberalize investment may take time to bear fruit,” she said.
Debuque-Gonzales said productivity losses from the coronavirus disease 2019 (Covid-19) crisis must be reversed.
She said the government should continue its prioritization of infrastructure spending, which helps address scarring by enhancing the country’s physical capital, boosting long-term growth, while also having short-run multiplier effects.
“High-potential areas include infrastructure for more efficient trade, better digital connectivity, and clean energy, especially where private sector participation is viable (with financial risks to government carefully controlled),” she added. “The government should also continue human capital investments in education, social protection, and public healthcare.”