Small businesses will suffer the most from the slow economic recovery of countries like the Philippines, which have meager fiscal stimulus despite ballooning debt for pandemic response, think tank Moody’s Analytics said on Wednesday.
“The longer the recovery, particularly if fiscal support has been modest, as in Indonesia, the Philippines and Thailand, there is a greater chance of long-term scarring. And this could be particularly evident among industries with a large share of small- and medium-size enterprises,” Moody’s Analytics chief Asia-Pacific economist Steven Cochrane said in his report titled “APAC Outlook: The Long and Winding Road.”
Micro, small and medium enterprises (MSMEs) account for over 99 percent of businesses in the Philippines. The government had extended wage subsidies for their workers as well as offered loans to help MSMEs bounce back but many had been shying away from borrowings due to fears they may be unable to pay them back.
As for public debt, the Philippines’ record-high outstanding obligations coupled with the prolonged recession, which spilled over to the first quarter saw debt-to-gross domestic product (GDP)—a metric that credit-rating agencies watch as this reflected an economy’s capacity to settle obligations—hit 60.4 percent, or slightly above the 60-percent level, which debt watchers consider manageable.
With a downscaled 6-7 percent economic growth expected for the entire year, the Philippines will end 2021 with total outstanding debt of about P11.5 trillion, equivalent to around 57.8 percent of GDP.
But Moody’s Analytics had projected GDP growth of only 5.3 percent this year—below the government goal—amid elevated consumer prices and expectations of sustained high unemployment. “The Philippines remains the laggard with a third quarter 2022 transition to expansion as it suffers problems on many fronts, such as its lack of effective testing and tracing—even during extensive and very strict quarantine periods that still remain in Metro Manila and neighboring provinces. Other issues include the Philippines’ modest fiscal policy support and fewer linkages to export markets in China and elsewhere,” Moody’s Analytics said.