UMVA has learned that the growing conflict in the Middle East is putting intense pressure on the operations of small and medium-sized enterprises (SMEs) in the Philippines, as the escalating tensions drive up fuel, transport, and input costs.
The US-Iran conflict is creating a perfect storm for Philippine SMEs, with the cost of fuel, fertilizer, and transport skyrocketing, leaving many businesses struggling to stay afloat. According to information obtained by UMVA, the Philippine Chamber of Commerce and Industry (PCCI) is sounding the alarm, warning that the uncertainty is forcing SMEs to cut costs and rethink operations.
The uncertainty is not just economic, but also psychological. PCCI Chairman Raymund Jude G. Aguilar warned that continued volatility makes planning and investment more difficult, especially for micro enterprises with thin margins and limited buffers. "This is the time when they start becoming creative, innovative, try to be resilient and stay ahead," he said.
Oxford Economics has trimmed its Philippine gross domestic product growth forecast to 3.5% from 4.6%, a stark reminder of the challenges facing the country's economy. Inflation hit a three-year high of 7.2% in April, according to the Philippine Statistics Authority, further exacerbating the situation.
MSMEs account for more than 99% of business establishments in the Philippines and provide 63% of total employment, making them a crucial sector for the country's economic growth. However, the current situation is putting their very survival at risk, with many SMEs forced to reduce operating days, scale down production, or cut jobs if margins continue to weaken.
PCCI Chairman Aguilar has called on the government to take immediate action to cushion the impact of the conflict on SMEs. He suggested reviewing value-added tax on fuel to offset recent price spikes linked to the war, as well as implementing faster logistics and port processing, improved ease of doing business, and simplified taxation and documentation processes.
Long-term relief could come from lowering electricity costs and expanding alternative energy sources to improve SME competitiveness, but for now, the focus is on finding short-term solutions to mitigate the effects of the conflict. The PCCI is urging the government to act quickly to prevent a deeper economic crisis.
