Socio-economic impact of COVID-19 pandemic on SMEs and support measures for this sector, addressed in public dialogue event

October 19, 2020

The socio-economic impact of the COVID-19 pandemic on Small and Medium Enterprises in the Republic of Moldova and the support measures for this sector were addressed in a video conference organized by UNDP Moldova in partnership with the Ministry of Economy and Infrastructure, with the participation of over 90 representatives of government institutions, advisory platforms, business and banking associations, as well as development partners.

The video conference included five thematic sessions and panels, where various topics were discussed on current business issues, challenges and responses of the Government, proposals from the business community and development partners, access to finance, supply chains and markets, innovation and digitalization, human resources.

During the event, the Secretary General of the Ministry of Economy and Infrastructure Lilia Palii acknowledged the support of UNDP Moldova in assessing the socio-economic impact of the COVID-19 pandemic, noting the importance of both the external evaluation and recommendations, to be reviewed and used in policy-making.

"Shortly after the onset of the COVID-19 pandemic, the Government launched a set of measures to mitigate the negative effects of the crisis on the business as well as ensured the continuity of the implementation of government programs to support the business, including the SME sector.

Although the SME sector is one of the most flexible in the business structure, which can adapt to possible structural and cyclical economic changes, the pandemic yet surprised them with multiple uncertainties and challenges. Lack of business continuity and liquidity, a declining market demand, unemployment constraints, lack of available infrastructure for rapid digital business transformation, etc. The pandemic is not over yet, and in addition to an assessment of the socio-economic impact, we must come with a response of well-articulated socio-economic policies for this period, but also for the future economy, which must be based on resilience and sustainability principles," said Lilia Palii.

In her turn, Dima Al-Khatib, UNDP Resident Representative for the Republic of Moldova, said that today's event would provide relevant inputs to the economic recovery plan being worked on by the Ministry of Economy and Infrastructure to support the SMEs affected by the COVID-19 pandemic.

"We have prepared a report on the socio-economic impact of the COVID-19 pandemic on vulnerable groups and economic sectors in the Republic of Moldova and came up with some policy recommendations. We hope that, following today's event, we will strengthen the dialogue between the partners and stakeholders on SME support in the pandemic and post-pandemic periods, identify the gaps in public programs and policies, and come up with additional business support initiatives," noted the UNDP Resident Representative for the Republic of Moldova.

The socio-economic impact assessment was conducted by UNDP Moldova, in cooperation with the UN country team and with UNFPA support. According to the report, prepared by PWC being commissioned by UNDP Moldova, the impact of the pandemic on SMEs has been significant, with most companies reporting sales declines of up to 75-100%. The main factors affecting the work of companies have been the decrease in demand for products and services, work restrictions, limited access to raw materials or supply disruptions (especially for imported materials) and distribution chains, decreased labor productivity. Eighty eight per cent of the entrepreneurs reported a negative effect of the pandemic, especially those in HoReCa, domestic non-food trade and services.

Experts estimate that the challenges will continue in the next 2-5 months, being related to logistical disruptions, possible work restrictions for some sectors, low market demand, low staff productivity and labor shortages. Companies expect to mitigate such challenges by reducing staff costs (83%), reducing administrative costs (75%) and postponing strategic investments (83%), as well as reducing the production volume (75%).

In this context, several policy recommendations have been formulated, including postponing tax payments and social security contributions for companies that record declining revenues, postponing payment of installments on SME loans, granting preferential interest loans and government guarantees for SMEs, postponing the deadlines for the submission of financial statements and audit reports, support for reintegration and recruitment of labor force, teleworking and shift work, e-commerce, and support measures for transport and storage.

The videoconference was attended by representatives of the State Chancellery, the Ministry of Finance, the Ministry of Agriculture, Regional Development and Environment, Economic Council to the Prime Minister, ODIMM, AmCham, the European Business Association, the Foreign Investors Association, the Moldovan SME Alliance, ATIC, the Chamber of Commerce and Industry, the Banks Association of Moldova, USAID, GIZ, EU Delegation to Moldova, World Bank, EBRD, etc.

Source: Ministry of Economy and Infrastructure