IMPACT OF THE CORONAVIRUS PANDEMIC ON THE COUNTRY’S ECONOMY

IMPACT OF THE CORONAVIRUS PANDEMIC ON THE COUNTRY’S ECONOMY

IMPACT OF COVID-19 ON THE GLOBAL ECONOMY

USA

From March 1 to April 1, 2020, more than 10 million Americans lost their jobs due to company closures. The unemployment rate increased from 3.5% to 4.4% by April 5.

Since March 1, 2020, 1.5 million jobs have been cut in the United States, and about 800,000 small firms have closed. The reduction mainly affected tourism, small hotel business, and entertainment services.

Spain

Covid-19 had a negative impact on trade. Volume index of retail trade decreased significantly from March to May this year. But at the same time, Covid-19 served as a catalyst for the development of online retail, increasing the percentage of online sales.

UK

According to the UK Small Business Federation, due to the coronavirus pandemic, more than half (53.9%) of small businesses reported a decline in revenue in the first quarter of 2020, with 84.1% of companies expecting a further decline in sales in the next quarter, 31% of entrepreneurs plan to cut off staff. The worst-hit industries in the first quarter of 2020 are arts, entertainment and recreation, as well as accommodation and food services, where forced business closures and social distancing will will hold back revenue for the foreseeable future.

Russia

For five months of 2020, the Federal budget showed a deficit of 406.6 billion rubles, compared with a surplus of 1283.3 billion rubles for the same period in 2019.

In May 2020, the unemployment rate rose to 6.1% from 4.5% a year earlier. This growth corresponds to an increase in the number of unemployed by about 1.1 million people.

In April and May, retail trade turnover in Russia fell by 23.4% and 19.2%, respectively, compared to the same period last year.

IMPACT OF THE CORONAVIRUS PANDEMIC ON THE COUNTRY’S ECONOMY

During the period January-June 2020, the country’s economy decreased by 1% compared to the same period last year. The most affected sectors of the economy were: trade (volume index – 89.4%), as well as transport and warehousing (85.4%).

The key factors of the decline in trade were:

• the introduction of quarantine measures throughout the country and the restriction of the activities of shopping facilities, food services, etc.
• devaluation of the national currency, which reduced the purchasing power of the population

The key factors in reducing the gross output of the transport and warehousing sectors:

• suspension of intercity bus transportation;
• prohibition / restriction of movement of public transport;
• prohibition / restrictions on passenger air transport.

Volume index by industry, in% of the corresponding period of the previous year
	January 2020	January-February 2020	January-March 2020	January-April 2020	January-May 2020	January-June 2020
Industry	104,1	105,8	105,8	105,9	104,8	103,1
Agriculture, forestry and fisheries	102,6	102,2	102,5	102,2	102,2	102,4
Building	112,5	111,9	111,7	105,5	105,9	111,2
Wholesale and retail trade; repair of cars and motorcycles	105,2	103,6	101,0	91,1	87,7	89,4
Transport and warehousing	103,6	100,5	98,7	89,0	85,9	85,4
Information and communication	109,8	110,7	110,5	109,6	109,2	109,0
Volume index of the economy of the Republic of Kazakhstan*	104,4	104,9	104,3	101,2	99,5	99,0

* – short-term economic indicator (based on the change in output indices for the basic industries: agriculture, industry, building and construction, trade, transport and communications, which make up more than 60% of GDP. The indicator is formed without calculating the unobservable economy and without applying other macroeconomic adjustments).).

DYNAMICS OF VOLUME INDEX OF TRADE IN JANUARY-JUNE 2020

From the beginning of the year to June, there has been a negative dynamics of volume index trade due to the spread of coronavirus infection, which began to spread in China and, as a result, had an impact on the trade sector of Kazakhstan. The maximum decline in trade volume index was recorded in April 2020.

At the same time, in May and June, in accordance with the easing the quarantine restrictions, there is a gradual recovery in trade. Many enterprises are gradually adapting to the new reality and applying new methods of work, primarily the transition to the e-commerce format, the removal of restaurant seats on the street, etc.

The volume index for retail decreased by 18%, versus 15.9% for wholesale trade. For the period January-June 2020, the volume index of retail trade showed negative dynamics in all regions, while the wholesale volume index showed positive dynamics in the Kyzylorda region.

IN RETAIL TRADE, THE DECLINE IS OBSERVED FOR NON-FOOD PRODUCTS

For the period January-June 2020, compared to the same period last year, there is an increase in the volume of trade in food products – by 139.6 billion tenge or 8.7%, while the volume of trade in non-food products decreased by 470.7 billion tenge, which amounted to 14.1%. This is due to the fact that due to introduction of quarantine measures throughout the country and the restriction of the activities of shops, the population increased the demand for food products, while most stores selling non-food products were closed, which affected a significant decrease in the volume of trade in non-food products.

WHOLESALE SHOWN A DECREASE IN BOTH FOOD AND NON-FOOD PRODUCTS

In the wholesale trade, there is a decrease in the volume of trade in food products by 447.7 billion tenge or 18%, while trade in non-food products decreased by 106.7 billion tenge, or 1.3%. The largest decrease in the volume of trade in food products was noted in Almaty – by 445.9 billion tenge.

SMALL BUSINESSES HAVE TAKEN THE HIGHEST BLOW, WHILE LARGE BUSINESSES HAVE BEGUN TO INCREASE IN TRADE

Among the retail trade enterprises, the turnover of small enterprises, which occupies the overwhelming majority of the share of turnover, decreased by 394.6 billion tenge, or 11.1%. In turn, the turnover of medium and large enterprises increased by 26.9 and 36.5 billion tenge, respectively, which amounted to 6.4% and 3.8%.

Among the wholesalers, the turnover of small businesses decreased by 673.5 billion tenge, or 7.7%. The turnover of large enterprises decreased by 37.6 billion tenge, or 8.7%. In turn, the turnover of medium-sized enterprises increased by 156.7 billion tenge or 10.4%.

INFLUENCE OF THE PANDEMIC ON THE NUMBER OF SMEs IN TRADE

In the field of trade, since the beginning of the year, there has been an increase in existing legal entities by 4.55%, which corresponds to the average for all industries. However, since the beginning of the year, the largest share of liquidated legal entities in trade has been observed – 56%.

A significant blow from the coronavirus has already been felt by individual entrepreneurs. Since the beginning of the year, there has been a 2% decrease in the number of existing individual entrepreneurs in trade, as well as in transport and warehousing, while in other industries there has been an increase.

REDUCING THE TRADE SECTOR CAN LEAD TO MASS UNEMPLOYMENT AS TRADE IS A PRIORITY IN EMPLOYMENT

In terms of employment in the trade sector, there is a slight increase of 2.6% compared to the same period last year. Considering that the indicators reflect quarterly data, as well as a decrease in the number of active individual entrepreneurs, it is expected that employment in the trade sector will decrease in the coming period.

Investments in fixed assets, million tenge
	January-June 2019	January-June 2020	Change
Agriculture, forestry and fisheries	191 304	231 831	21%
Industry	3 397 075	3 143 199	-7%
Building	52 855	27 663	-48%
Wholesale and retail trade; repair of cars and motorcycles	117 401	61 065	-48%
Transport and warehousing	401 202	384 852	-4%
Information and communication	31 097	39 494	27%

In January-June 2020, compared to the same period in 2019, the largest decrease in investments by 56,336 billion tenge or 48% was noted in the field of trade, as well as by 25,193 million tenge or 48% in building and construction.

For the period January-June 2020, compared to the same period in 2019, there is a 75.8% decrease in volume index of investment in trade. The increase in volume index of investments was noted in the Karaganda region, Nur-Sultan city, East Kazakhstan, Atyrau and Kyzylorda regions.

SURVEY OF JSC “CENTER FOR TRADE POLICY DEVELOPMENT “QAZTRADE” CONCERNING THE IMPACT OF COVID-19 ON THE TRADE SECTOR

To assess the impact of the coronavirus pandemic on small and medium-sized businesses in trade, experts from the “Center for Trade Policy Development “Qaztrade” (hereinafter referred to as JSC “CTPD “QazTrade”) conducted a survey of entrepreneurs from the 2nd to the 21st June of this year Appendix 1).

The survey was attended by owners of shopping and entertainment centers, shopping markets, trading houses, restaurants, cafes, canteens, convenience stores, flower shops, supermarkets, minimarkets, and wholesale warehouses. Moreover, 60.3% of the respondents are individual entrepreneurs, 36.5% are limited liability partnerships.

To the question “Did your company work during the emergency period (March 16-May 11, 2020)?” half of the respondents (50.8%) answered that they did not work, 38.1% – worked partially (50/50) and only 11.1% – worked in full. At the same time, after the cancellation of the state of emergency, 54% of respondents fully earned their income.

According to the results of the survey, every third entrepreneur expressed plans to dismiss employees due to the consequences of COVID-1 (33% of respondents answered positively to the question “Do you plan to dismiss employees because of the consequences of COVID-19?”).

ALL BUSINESS RESPONDENTS SAID THAT HAD PROBLEMS RELATED TO THE CORONA-CRISIS

Over the past three months, 74.6% of the interviewed entrepreneurs have reduced turnovers and 65.1% have increased their debts. Every fourth entrepreneur has reduced their expenditures on remuneration of labour (25.4%). 69.8% of respondents had a decrease in their client base during this period (Figure 7). At the same time, 71.4% of respondents assessed the current financial condition of their business as unstable.

Among the surveyed entrepreneurs, almost half (49.2%) would like to take advantage of government support measures, 14.3% plan to close the businesses (Figure 8). At the same time, 16% of respondents said that they will need more than a year after the removal of the quarantine for the company to return to its previous course of activity, 30.2% hope that it will take 3-6 months after the removal of the quarantine.

60% of respondents are not aware of the measures taken by the Government to support businesses due to the COVID-19 pandemic.

AMONG THE MAJOR CHALLENGES FACED BY BUSINESSMEN DUE TO COVID-19, THE RESPONDENTS HAVE INDICATED THE FOLLOWING:

• reducing the number of customers;
• insufficient financial resources to maintain the current staff and conduct business;
• increase in debt;
• creating barriers to the delivery of goods within the region and/or to other regions,
• increase in the cost of purchased products.

THE MAIN MEASURES THAT THE GOVERNMENT NEEDS TO TAKE TO SUPPORT TRADE WERE IDENTIFIED BY RESPONDENTS AS FOLLOWS:

• targeted financial assistance;
• providing grants to small businesses and loans at low interest rates;
• providing space on preferential terms in shopping and entertainment centers for domestic manufacturers (at least 40% of the space must be occupied by domestic light industry manufacturers);
• activation of the holding of fairs, such as additional distribution channels;
• strengthening state support for domestic producers;
• taking additional measures to restore the purchasing power of the population (making one-time payments, compensations to the population);
• reduction in the cost of utilities.

EXAMPLES OF GOVERNMENT SUPPORT IN FOREIGN COUNTRIES

New York, Florida, Massachusetts and Sacramento offer zero interest loans to help small businesses.

New York offers small businesses with fewer than 5 people a grant to cover 40% of payroll costs for two months to help retain employees. San Francisco offers $ 10,000 to pay wages and rent for businesses with fewer than 5 employees.

United Kingdom:

Small businesses can receive a one-time grant of £ 3,000 to cover running costs.

One-time cash grants ranging from £ 10,000 to £ 25,000 are available for businesses in the retail trade sector.

South Korea:

Help reduce commercial rents by giving landlords a 50% discount on income tax in the first half of the year

5.5 trillion won loan guarantees for small and medium business enterprises and 100 percent loan guarantee of 3 trillion won for small traders.