Digest on COVID-19 Impact on SMEs in EAP January – February 2021

Armenia Azerbaijan Georgia Moldova Ukraine
Digest on COVID-19 Impact on SMEs in EAP January – February 2021

Armenia

  • The Armenian government approved its Economic Response programme and associated Action Plan. This was based on the ninth (overcoming COVID-19 and elimination of its far-reaching effects) and tenth (reinstatement of the economic environment) paragraphs of the roadmap setting the priorities, goals, and scope of anti-crisis measures in place until the end of the first half of 2021. Read more
  • A rapid response group to address business challenges will be formed in the National Assembly of Armenia. According to Babken Tunyan, chair of the parliamentary commission on economic issues, the group will look to promptly solve all challenges faced by entrepreneurs. Read more
  • Coronavirus has revealed problems in the domestic wine market of Armenia because Armenian wine is consumed exclusively in restaurants and open cafés. According to Zaruhi Muradyan, director of the Vine and Wine Foundation, the outbreak of COVID-19, which has hit a number of areas including catering, has led to a sharp fall in the level of consumption, demonstrating a need to work intensely on improving the wine consumption culture in everyday life. Read more
  • A lack of economic activity from January-November 2020 deepened the decline of economic growth, with a fall of 7.2% per annum. Industries that may have previously acted as drivers of economic growth are now in decline amid the coronavirus crisis. The service sector and trade have also shown a decline, each by 13.5%. Read more
  • Since 1 January 2020, the number of micro-entrepreneurship entities in Armenia have begun to grow rapidly, reaching 35,000 entities and far exceeding the forecasted 22,000. Armen Poghosyan, Deputy Minister of Finance, noted an exemption from income tax on these entities, where only fixed payments in the amount of 5,000 AMD (USD 9.5) are necessary as the reason for the growth. Read more
  • Economic decline in Armenia will be about 8.5%, as the volumes of import, export, and consumption have decreased by 20%, says the Minister of Economy – Vahan Keropyan. He remains optimistic, however, with a goal of reaching double-digit economic growth for the country. Read more

Azerbaijan

  • The Entrepreneurship Development Fund of Azerbaijan under the Ministry of Economy provided entrepreneurs in 2020 with preferential loans in the amount of 126.9 million manats (USD 74.6 million) through authorised credit organisations. Concessionary loans were issued to finance 908 investment projects with a total value of 397 million manats (USD 233 million). More than 2,700 new jobs were created thanks to these loans. Read more
  • Between January-November 2020, banks and non-bank credit institutions issued loans to entrepreneurs in the trade and services sector in the amount of 59 billion manats, or USD 1.5 billion (an increase of 11% over the year), the Central Bank reports. Lending to the trade and services sector, as well as industry and production in Azerbaijan, reached a 5-year high. Loans to the industry and production sector amounted to 1.38 billion manats, or USD 811 million (an increase of 48.5%). Read more
  • The Centre for Social Research conducted its first gender assessment on how the pandemic affects human lives. The assessment states that the pandemic has negatively affected both men and women. Thirty-seven per cent of men aged 18-34 became jobless, whilst in 18% of cases, both men and women faced reduced working hours. In rural areas this equated to 42.6% of women and 34.2% of men, while in urban areas it was 51.4% and 26.7% respectively. The most drastically impacted were female owners of small enterprises. Read more

Belarus

  • The total cost of combating the Covid-related pandemic has amounted to 2 billion rubles (USD 780 million), where to date, state support for business under the decree "On Support of the Economy" has been 65 million rubles ($ 25.4 million), mainly in tax incentives. According to estimates of the Eurasian Development Bank, Belarus has lost 1.5% of its GDP. Read more
  • Since May 2020, employers were authorised to ask for a state subsidy to match actual salaries of employees receiving minimum wage. Incomes decreased due to the pandemic and, over the year, more than 20,000 people received subsidies of 160 rubles on average (USD 63). Read more
  • The decree on economic support, which was suspended in October, was amended and came into effect again on 8 January 2021. Now, in addition to rental benefits and tax deferrals, employers can declare production down time until further notice, send employees on paid leave for self-isolation, and grant sick leave of three days without a doctor’s certificate. Read more
  • Actual unemployment in 2020 dropped to a minimum (4.1%), while the official unemployment rate for the entire year saw minimal change (0.2%). Experts believe this to be related to hidden unemployment, where people work part time or are on leave, but officially remain on payroll. Read more
  • According to surveys on the impact of the pandemic, at the end of 2020, 49% of enterprises had a decrease in revenue, 40% preserved the status quo, and 11% increased revenue. About 21% introduced a hiring freeze and 12% laid off employees. More than half of all enterprises (56%) expressed concern about the deteriorating epidemiological situation, while another 36% are worried about the deterioration of state policy in relation to business. Most enterprises expect the impact of a second wave to have an extremely negative on their operations. Read more

Georgia

  • The Georgian economy shrank by 6.1% in 2020, the National Statistics Office reports. Compared to the corresponding period of the previous year, a decrease was observed in the following activities: accommodation, construction, arts, entertainment and leisure, manufacturing, transport and warehousing, wholesale and retail trade, and repair of cars and motorcycles. Read more
  • The Georgian tourism sector lost USD 2.5 billion in 2020, where Georgia’s revenue from international tourism was down 82% in the first 11 months of 2020. International visitors, who arrived before the announced lockdown, are responsible for a major share of this remaining revenue. According to the Georgian National Tourism Administration, the number of international visits was down 81% y-o-y. Read more
  • For 78.8% of surveyed companies, the factors hindering business activity have resurfaced once more, according to research from a quarterly report by the Business Association of Georgia (BAG), PMC Research Center, and the Institute for Economic Research. In 4Q 20, as in previous periods, the four most important factors hindering business activity included: weak demand for products and services; legal and administrative barriers; lack of specialists; and financial constraints. Weak demand remained the most prominent factor in this regard, cited by 78% of respondents. Meanwhile, 56% of respondents name legal and administrative barriers as a hindering factor. Read more
  • The Georgian government has lifted several coronavirus-related restrictions due to a decrease in daily infections. All public transport, shops, shopping centres, and open markets around the country have resumed operations. Restaurants and food facilities continue to provide only delivery service. In-person studies, allowed only in some cities, will resume throughout the country starting 15 February 2021 and Public transport, open markets, and food facilities (except delivery service) will not work on weekends. Read more
  • The Government of Georgia is looking to subsidise 80% of the interest rate on loans to restaurants, the sports industry, and private kindergartens. The subsidy will apply to all loans approved before 1 December 2020, as the food industry needed additional loans in the coming months, most especially for working capital, salaries, and rent. Read more
  • Under the Georgian government's anti-crisis economic plan, unemployed persons will receive 200 GEL (about USD 60) in monthly assistance for six months from January 2021. Individuals who worked from January to November 2020 (for two months or more) and received a salary during the course of this period, but did not receive a salary for one month or more between December 2020 and February 2021, are entitled to compensation. The compensation will apply to 106,080 persons. Read more
  • The amendments made to the Tax Code provide several tax breaks for businesses. Exemption of income tax will continue for another six months, from 1 December 2020. The possibility of taxing property leases/leasing services with VAT also continues. Persons engaged in the tourism sector, hotels, restaurants, etc, will be exempt from property tax in 2021. Persons carrying out activities in the tourism sector, hotels, restaurants, etc, sectors have the right not to pay deferred income tax. Hotels located in winter resorts will have the option of postponing their income tax to 20 April 2021 without facing fines. The amount of VAT calculated on imports will not include additional components (import-related fees, associated costs, etc) before 2023. Read more

The Republic of Moldova

  • In December 2020, Moldovans received remittances worth USD 147.84 million from abroad, an increase of 9% compared to the same period last year. Read more
  • Every second company in Moldova is operating at half capactiy or has closed either temporarily or permanently. Economic sectors, including HoReCa and light industry, are facing declining sales, various uncertainties, decrease in demand, as well as lack of liquidity. Read more
  • Moldova's exports fell by USD 293 million because of the global crisis caused by the Covid 19 pandemic. Read more
  • During the crisis caused by COVID-19, tens of thousands of people lost their jobs or have been underpaid. The authorities have not provided enough support to companies or employees to more easily overcome this period. Read more
  • More than 8,400 companies in the Republic of Moldova went bankrupt last year. This figure is less than in 2019, which showed a loss of more than 25% of businesses according to the State Fiscal Service. Read more

Ukraine

  • The President of Ukraine established the Council for Promoting Small Business Development in January 2021. It will serve as an advisory board that will meet once a month. The Council is aimed at developing legislative changes to comprehensively address the problems of microbusiness especially amidst the pandemic. Read more
  • Five hundred thousand Ukrainians have received UAH 8,000 (USD 287) as one-time financial assistance from the state. These include individual entrepreneurs who have lost part of their income due to quarantine restrictions. The government transferred a total of UAH 3.6 billion (USD 129 million). Read more
  • The Cabinet of Ministers of Ukraine has partially lifted the moratorium on business tax audits introduced during the quarantine. Investigations of entrepreneurs who carry out risky operations as well as checks on compliance with the deadlines for receipt of goods for import transactions and/or foreign exchange earnings for export transactions will resume. Read more
  • Entrepreneurs have already received more than UAH 20.2 billion (USD 717 million) within the state financial support programme for small and micro businesses, “Affordable loans 5-7-9%”. Of these, UAH 4.6 billion (USD 165 million) were issued as anti-crisis loans. Twenty-five partner banks have already joined the programme. Read more
  • Ukrainian individual entrepreneurs paid UAH 27.6 billion (USD 990 million) in taxes in 2020. Despite the pandemic, this is 10% more than in 2019. Also of note, the number of individual entrepreneurs remains unchanged at 1.9 million. Over the past nine years, tax revenues from individual entrepreneurs have increased 27 times — by about UAH 3 billion (USD 107 million) per year. Read more

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