UNEMPLOYMENT is expected to surge in service sector-reliant Asia because of the pandemic, with the Philippine jobless rate projected at 6.8% this year from the 5.3% pre-outbreak forecast, according to S&P Global Ratings.
“Measures designed to limit viral spread are striking at the heart of the engine of job creation across Asia-Pacific — the service sector,” S&P said in a report, “Jobs and the Climb Back from COVID-19.”
Philippine unemployment in 2019 dipped to a 14-year low of 5.1% after a 5.3% reading in 2018, according to the Philippine Statistics Authority.
“In the absence of large and targeted wage subsidy schemes, we estimate that unemployment rates would rise by well over 3 ppt (percentage points) across the region, much more than the typical recession,” S&P said.
According to the National Economic and Development Authority, job displacement caused by the pandemic could involve between 116,000 and 1.8 million workers.
S&P said that the services sector has become a more significant part of the job market across the region, with 55 out of 100 workers employed in services against 14 in the industrial sector. Among those in services, 22 are employed in wholesale and retail or hospitality.
S&P added that small and medium-sized enterprises typically fuel services growth. It noted that about 50% of the service sector in emerging markets are firms with less than 250 employees.
“SMEs usually have fewer resources to draw on to weather an economic sudden stop. As revenues collapse, to stay alive, these firms will be forced to cut whatever expenses they can,” S&P said, noting that their largest expenses are typically wages.
In the Philippines, more than 90% of businesses are classified as MSMEs (micro-, small, and medium-sized enterprises), and they fuel employment opportunities, according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.
Mr. Ricafort also said that the service sector is a significant part of the economy, as it accounts for nearly 60% of economic output, against the industry sector’s 30% and agriculture sector’s 10%.
“The lockdown and any social-distancing measures could still continue for months and could still adversely affect some services industries that depend so much on person-to-person transactions such as tourism, travel, transport and other related industries,” Mr. Ricafort said in an e-mail Tuesday.
Recent government programs to aid affected businesses amid COVID-19 may minimize the impact of the outbreak on unemployment, according to UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion.
“With BSP (Bangko Sentral ng Pilipinas) recently announcing help for SMEs through bank loans together with government guarantees, this will help cushion the potential unemployment that a majority of SMEs may experience. It will help restart the economy in a positive way,” Mr. Asuncion said in an e-mail. — Luz Wendy T. Noble