Denpa News As the global economy gradually emerges from the COVID-19 pandemic, we are reminded every day of the fragility of the recovery, threatened by new variants, outbreaks and increases in cases. Also that it is an irregular and uneven recovery. Many low- and middle-income countries continue to face high levels of virus transmission, as well as obstacles to vaccination, which keep business activity below pre-pandemic levels.
Companies, and in particular SMEs, continue to be the most affected by the economic crisis. To better guide policy in support of a productivity-led private sector recovery, the World Bank has taken the ‘pulse’ of companies in 76 countries regarding the impact of COVID-19 on their performance (opinion polls from companies and company surveys) since the start of the pandemic. With the availability of data from more than 100,000 signatures, we can better understand how companies around the world have coped with the pandemic and what needs to be done to forge a sustainable path forward.
A U-shaped recovery in business activity – A first encouraging sign in the data is that business activity is picking up. Three out of four companies that closed temporarily during the first months of the pandemic are working again. While business sales are still 28% below pre-pandemic levels, this is a significant improvement from a 41% decline in the months immediately after the onset of the crisis, which suggests a U-shaped recovery pattern. Despite disruptions in global production networks, exporters are recovering faster than other companies, although their sales levels are also below pre-pandemic levels .
More companies are going digital : more companies, and exporters and importers in particular, have embraced digital technologies and are using them to adapt to the crisis.The proportion of companies that increased the use of digital technologies rose from 31% in the first months of the pandemic to 44% between seven and 12 months after the start of the crisis, while the proportion of companies that made new investments in digital solutions grew from 17% to 29%. Encouragingly, female-led microenterprises have had a significantly better chance of increasing the use of digital platforms than their male-led counterparts.
Jobs are recovering, albeit slowly : our surveys show that while fewer companies are cutting their workforce, the pace of job recovery remains slow compared to the initial decline. The proportion of companies that reduced working hours or wages fell from 44% at the beginning of the crisis to 32% later in the pandemic. While this is an improvement, the number of jobs to be recovered is still well below the job losses experienced before the pandemic.
Despite increased business activity, the adoption of digital technologies and some degree of job recovery, uncertainties and ongoing financial vulnerabilities remain the main threats to a more equitable and sustainable recovery. In fact, the companies responded that their sense of uncertainty remains just as high more than a year after the start of the pandemic. In the same way, financial vulnerabilities continue to increase: while 37% of companies have recovered from the danger of being late in their payments since the first months of the pandemic, a new group of companies – 30% of the total – are now in default or are liable to default.
High levels of uncertainty also affect how companies are willing to invest in digital technologies and hire staff. Our surveys show that the recovery in sales has not necessarily matched a higher level of hiring. The survey data also clearly indicates that the slow recovery in employment is not explained by increased automation or adoption levels of digital technologies, but rather by an even greater sense of uncertainty among companies. This suggests that if public policy measures are not taken, all the jobs lost during the pandemic may not be recovered, even as sales return to pre-crisis levels.
Historically high uncertainty demands that policy makers inject not only capital but, above all, confidence into the business sector. To do this, governments should first ensure clear and immediate communication of the eligibility, duration and objectives of public assistance programs , so that companies can feel comfortable with consistent policy messages and results. This also means that we must continue to collect and analyze data on the impact of the crisis on business and regulatory responses in the midst of an ongoing pandemic to better understand what is needed, and monitor the effectiveness of assistance programs. .
Second, it is essential to protect the ability of the financial sector to continue providing financing, especially in countries with less developed financial markets. As our survey results indicate, large businesses are recovering faster than small and micro businesses. Furthermore, financial vulnerabilities are greater for companies run by women compared to those run by men. Therefore, helping banks and other financial and non-financial institutions expand financing for viable and productive small and medium-sized enterprises could help close financing and gender gaps. In addition to financing, women-owned businesses face a number of limitations, from laws and regulations to policies that discriminate against them. It is an opportunity to correct and address these biases so that women-owned businesses can be an integral part of the recovery.
Third, governments have the opportunity to accelerate the digital transition through programs that facilitate and incentivize the adoption of technologies. Digital technologies have proven to be an effective means of mitigating the impact of the crisis on business performance, particularly women-led businesses. However, many companies – and small businesses in particular – invest relatively little in digital technologies and product innovation. Policies to facilitate the adoption of technologies will help companies cope with the effects of the current crisis, as well as lay the foundations for faster productivity growth in the future.
These findings, and others, are discussed in greater detail in a working paper recently published World Bank (PDF). Now that the business opinion polls panel(i) [on COVID-19] covers 30 metrics ranging from sales to business expectations, we are committed to helping policymakers across the globe. the world to better assess risks at the company level and design public support programs. While the pandemic is not over yet, we hope that our continued effort to collect timely and policy-relevant data will help lay the foundation for a sustainable, resilient and inclusive recovery , and enhance the set of tools available to those charged with governance. formulating policies to deal with future crises.