Coronavirus (COVID-19) impact on the entities of the SME sector and impact remedy tools

The outbreak of coronavirus (COVID-19) in February 2020 caused an emergency situation in the global economy and slowed the global economic growth, for the existing restrictions hurt industry and agriculture - the key sectors of the economy focused on exportation, as well as tourism and the hotel industry. Due to the crisis, organizations have faced a number of problems, including restrictions on the in-office presence of employees, supply chain disruptions, and the decline in demand due to changes in the consumer behavior and government-imposed restrictions. Despite the fact that these problems are typical of large and small and medium-sized enterprises, the crisis was a particularly severe blow to the SME sector.

In order to meet the challenges posed by the spread of the Coronavirus, on March 26, 2020, the Government of the Republic of Armenia adopted a package of comprehensive measures dedicated to neutralization of the Coronavirus-driven economic impact, which envisages several tools for provision of assistance to Armenian businesses, in particular:

  1. Within the 1st measure for neutralization of the Coronavirus-driven economic impact, provision of loans on preferential terms is planned, which is aimed at solving the problems and temporary difficulties of the borrowers due to the current situation. The assistance is applicable to the loans provided to businesses solely for the purpose of carrying out the expenses specified by the given decision, only if compliant with the mandatory criteria for provision and the necessary requirements.
  2. The purpose of the 2nd measure for neutralization of the Coronavirus-driven economic impact is to support business entities operating in the agricultural sector to alleviate the problems caused by the spread of the Coronavirus.
  3. The purpose of the 3rd (completed) measure for neutralization of the Coronavirus-driven economic impact was to provide emergency assistance to business entities in the Republic of Armenia that operated as small and medium-sized enterprises and met the criteria stipulated by the measure to continue operations or re-organize or adapt to the changed economic situation. Within the framework of the measure, assistance at the maximum value of 50 million Armenian drams was provided to business entities in the form of targeted preferential loans received from banks or credit institutions operating in the territory of the Republic of Armenia.
  4. The purpose of the 5th, 18th (both completed), and 21st measures for neutralization of the Coronavirus-driven economic impact is to support individual business entities in the Republic of Armenia with provision of one-time grants for protection of effective jobs endangered by the difficulties caused by the spread of the Coronavirus.
  5. The purpose of the 10th measure for neutralization of the Coronavirus-driven economic impact is to support individual micro-enterprises in the Republic of Armenia with provision of one-time grants due to the spread of the Coronavirus.
  6. The purpose of the 17th measure for neutralization of the Coronavirus-driven economic impact is to support individual business entities operating in the sector of high technologies in the Republic of Armenia for protection of effective jobs endangered by the difficulties caused by the spread of the Coronavirus, as well as for promotion of implementation and commercialization of innovative ideas in this field.
  7. The purpose of the 19th measure for neutralization of the Coronavirus-driven economic impact is to facilitate the implementation of entrepreneurial ideas of beneficiaries seeking to start a business from scratch and development of innovative business plans of the beneficiaries through expansion of entrepreneurial knowledge and enhancing the accessibility to financing. By means of this measure the guarantee fund of the Investments Support Center, established within the framework of the annual SME state support programs, was replenished, which is envisaged for lending with a guarantee loan and implementation of realistic business projects meeting the requirements of the measure.
  8. The purpose of the 23rd measure for neutralization of the Coronavirus-driven economic impact is to provide assistance to Armenian business entities operating in certain sectors directly related to tourism, to alleviate their financial problems, ensure the continuity of their operations, and maintain existing jobs.
  9. The purpose of the 24th measure for neutralization of the Coronavirus-driven economic impact is to support business entities in the Republic of Armenia which in 2020 are engaged in processing of agricultural raw materials, including grape processing, to mitigate the risks caused by the spread of the Coronavirus and associated with the current liquidity of their finished products and attract necessary additional financial resources for grapes purveyance.
  10. The purpose of the 25th measure for neutralization of the Coronavirus-driven economic impact is to support transport companies servicing the tourism sector by reimbursing 75% of the unpaid interest from April 1, 2020, which will help these companies repay their loan obligations to ensure the continuity of their businesses, as well as protect the assets pledged as collateral for a development loan.

Due to the Coronavirus pandemic, the gross domestic product decreased in the 1st half of 2020 (-5.7%), which is mostly due to the decline in the sectors of processing industry, accommodation and catering industry, and trade. The economic decline continues throughout the year. In January-August 2020, Armenia’s Economic Activity Index (EAI) was -6.4% compared to the same period last year. The decline was due to the fall in the sectors of services (-10.8%), trade (-11.5%), and construction (-19.1%).

Being integrated in the global value chains, the effects of the global economic slowdown are indirectly reflected on the Armenian economy, especially the demand for Armenia’s exports. In January-August 2020, the volume of commodity exports amounted to 1,567.9 million US dollars, decreasing by 106.4 million US dollars or 6.0% compared to the previous year. The reduction in the volume of the gross commodity exports was largely due to the following products:

  • Brandy: the decline was -26 million US dollars or -18.8%
  • Iron smelting: the decline was --7.6 million US dollars or -28.4%,
  • Diamond stone: the decline was -19.5 million US dollars or -53.1%
  • Tobacco: the decline was -15.5 million US dollars or -9.6%
  • Jewelry: the decline was -15 .3 million US dollars or -52.4%.

The tourism sector is one of the most affected sectors of the economy due to the pandemic. In January-June 2020, tourist visits amounted to 331,264 people, which is less by about 458,791 visits/people or about 60%.

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