Nearly every business in the world has been affected by COVID-19, says World Bank

Almost a year into the novel coronavirus pandemic, nearly every business in the world has been affected by the health crisis, often through multiple shocks at the same time, says the World Bank.

On average, companies’ sales dropped 27 per cent in October 2020 – January 2021 from pre-pandemic levels, after plunging 45 per cent in April – September 2020, according to a recent World Bank analysis based on ongoing surveys with more than 120,000 firms in more than 60 countries.

The surveys aim to capture the impact of the pandemic on firms’ performances. This, the organisation said, contributes to understanding businesses’ adjustment strategies and guiding policy responses by governments and multilateral institutions, with the belief that data-driven policymaking will be key to guide the recovery.

“Crises are nothing new to small enterprises in developing countries… inflation, credit crunches, and currency volatility often put to test the ability of millions of business owners to navigate turbulent waters,” the World Bank indicated.

“But performance has varied widely, even within countries and industries. Firms in countries more deeply affected by COVID-19 have fared worse, as well as those in sectors severely struck by the pandemic, such as hospitality,” it continued.

The analysis also shows that smaller firms are being hit much harder. Yet, even for firms of the same size, and in the same sector and country, there are vast differences.

A substantial number of firms saw their sales stay the same or increase during the pandemic, about 20 per cent during the first few months and as much as 34 per cent in the months that followed.

On the other hand, 25 per cent of the most-affected businesses reported a drop in sales of 72 per cent in the early months of the pandemic and of 50 per cent in the following months.

In some firms, management has been more resourceful in finding new sources of revenues, or reinventing their businesses, such as moving their sales online or switching to different products. Or, in the case of exporters, some have widen their target market.

According to the World Bank analysis, the need for businesses to keep up with ever-changing conditions will only grow as governments taper off relief and overall access to finance becomes more limited.

“But the adoption of online platforms hasn’t been widespread. Globally, about one third of firms have increased the use of Internet, social media and other digital platforms in response to the pandemic, and less than 20 per cent of businesses have invested in new equipment, software or digital solutions,” the analysis indicated.

“The adoption of technology was much lower among smaller firms, which typically face tougher constraints in terms of lack of demand, higher uncertainty and weaker managerial capacities. In addition, these companies often have less access to finance and more difficulty accessing high-speed Internet”.

However, interesting to note, despite the impact of COVID-19, only 15 per cent of firms had laid off workers in April-September 2020. Two thirds of businesses adjusted their payroll by reducing hours, wages, or granting paid or unpaid leave to workers, largely due to high levels of uncertainty about the duration and depth of the shock.

In response to the crisis, developing countries have introduced a wide variety of support programmes for companies and workers. Yet access to support programmes has been limited, the analysis shows.

“Only one in 10 companies surveyed in low-income economies has received some sort of public support, compared with half of all businesses in high-income countries. There are also substantial disparities by firm size, with the probability of accessing policy support ranging from 25 per cent for micro firms to 43 per cent among large firms,” the World Bank indicated.

This means that the businesses most affected by the shock – small firms and those in poorer countries – were also the least likely to receive government support.

The surveys show that two elements are particularly important to ensure that support reaches businesses.

The first is the availability of information about support programmes – as much as 40 per cent of firms globally and 71 per cent of firms in low-income countries – reported lack of awareness as the main obstacle to accessing support.

The second is the targeting of programmes. One-fifth of firms that did not experience any shock or sales drop due to COVID-19 reported having received public support, suggesting that scarce fiscal resources could be targeted more efficiently.