FOLLOW-UP ENTERPRISE SURVEYS FOLLOW-UP ENTERPRISE SURVEYS FOLLOW-UP ON COVID-19 WHAT BUSINESSES EXPERIENCE Moldova 2021 – Round 3 1 FOLLOW-UP Introduction Figure 1b: Share of firms temporarily closed at the The outbreak of COVID-19 affected individuals and time of the interview (%) businesses, alike. Understanding the impact of the crisis 15 Percentage on businesses, and subsequently how firms are 10 recovering, gives insights into the overall health of the 5 economy as the world tackles the health crisis it is facing. The follow-up surveys to the standard Enterprise Surveys 0 (ES) aim to assess how businesses are adapting and R-1 R-2 R-3 recovering as the first signs of improvement appear in the global health situation. Sales This document summarizes the main findings from the The intensive margin of the effects following the outbreak follow-up surveys in Moldova. Business owners and top can be measured by changes in firms’ monthly sales managers of 360 firms were interviewed between April compared with the same month of the prior year. Figure 2019 and November 2019 as part of the standard ES. The 2 reports this measure, disaggregated by firm size and sector, for the three rounds of the follow up surveys. same firms were re-contacted in June 2020, in October/November 2020, and again in May/June 2021 for Figure 2: Average change in monthly sales compared three rounds of follow-up surveys. This document to prior year for the three rounds of the surveys (%) complements a similar summary that was prepared Moldova Small Medium Large immediately after the first and second rounds of the 0 % Change in follow-up survey. -12 -4 -6 -14 sales -15 -21 -29 -34 Firms Operations -57 -61 -49 -51 R-1 R-2 R-3 An important measure of the effect of the pandemic on -100 the private sector is the share of firms that have exited Note: The R-1 series refers to changes May 2020 vs May 2019, R-2 refers to September/October 2020 vs September/October 2019, R-3 the market during the economic crisis. Figure 1a shows refers to April/May 2021 vs April/May 2020. two estimates of the share of firms that have closed. The left side of the figure shows the share of firms that were confirmed to have closed since the pandemic was Workforce declared. The right side uses a wider definition of closed The pandemic had both direct and indirect effects on the firms: in addition to the firms included in the left side, it workforce. Beyond the effects on health and family includes the firms that closed since the baseline ES, and needs, restrictions on mobility due to health risks or also the firms that could not be contacted during governments’ actions in their efforts to curtail the fieldwork and therefore are assumed to have closed. The contagion, as well as unemployment or under- estimates are disaggregated by size, as observed in the employment due to decreased economic activity have baseline ES. Figure 1b shows the share of firms that reshaped the workforce. Figure 3 displays a measure of confirmed to be temporarily closed at the time of each the change in employment levels for the average firm round. compared to prior the outbreak of COVID-19. Figure 1a: Share of firms that permanently closed (%) 20 Figure 3: Average change in permanent workforce since 15.2 15.6 15.0 December 2019 Percentage 15 11.7 0 10 3.4 3.7 3.0 2.6 -10 5 Percentage 0 -13 -11 -20 % confirmed permanently % confirmed or assumed -21 closed since pandemic permanently closed -30 -28 declared -31 -40 -35 Moldova Small Medium Large Moldova Small Medium Large Manuf. Serv. 2 FOLLOW-UP Finance Policy As economies were increasingly affected by the COVID-19 Local, national, and international institutions put in place pandemic, the private sector experienced growing different measures aimed at countering the economic financial distress. Figure 4 displays the share of firms effects of the pandemic. Figure 6 illustrates the share of delaying payments to suppliers, landlords, or tax firms that received or expect to receive any national or authorities for more than one week due to the COVID-19 local government assistance, including but not limited to outbreak. This measure provides a sense of the cash transfers, deferral of payments, access to new credit, magnitude of the liquidity or solvency crisis induced by fiscal relief, or wage subsidies. the pandemic. Comparing the results over the three rounds of surveys allows visualizing the dynamics of the Figure 6: Share of firms that received or expect COVID-19 financial distress. pandemic-related government support (%) R-1 R-2 R-3 Figure 4: Share of firms delaying payments for more than one week due to COVID-19 over the three rounds 30 24 % of Firms of the surveys (%) 20 14 R-1 R-2 R-3 10 10 10 10 100 86 8 74 74 82 10 3 5 5 6 5 4 4 6 70 70 72 71 1 2 1 64 61 58 60 61 52 55 58 % of Firms 50 50 0 50 Moldova Small Medium Large Manuf. Serv. 0 Expectations Moldova Small Medium Large Manuf. Serv. Firm expectations play an important role in how the pandemic affects the economy. Based on these Gender expectations, firms make decisions on production, Figure 5 presents the average percentage point change in investments, workforce, and all other aspects of their the proportion of females as a fraction of all permanent activity. The expectations may also play an important role full-time workers. The change is computed since the ES in shaping the process of economic recovery. Figure 7 baseline. Negative (positive) values mean that the follow- shows how the average number of months that firms up survey revealed a decline (increase) in the share of expect it will take before they are able to return to their females among the permanent full-time workers. normal level of sales changed over the three rounds of interviews. Figure 5: Percentage point change in share of females among the permanent full-time workers Figure 7: Average number of months firms expect it will take to return to normal level of sales 1 0.2 R-1 R-2 R-3 0 15 PP change Moldova Small Medium Large Manuf. Serv. -1 -0.1 10 Month -1.0 -1.0 10 7 -2 5 5 5 5 6 5 6 -1.4 5 -3 -3.0 -4 0 Moldova Manuf. Serv. 3 FOLLOW-UP Appendix The following table reports some of the indicators created based on the three rounds of the ES follow-up surveys. Moldova R-3 Moldova Moldova R-1 R-2 All Small Medium Large Manuf. Services Firms Firms Firms Firms Firms Firms Operations Percent of firms confirmed permanently closed 1.3 1.9 4.1 4.7 2.8 2.6 0.7 5.3 Percent of firms confirmed or assumed permanently 15.3 10.8 15.2 15.6 15.0 11.7 12.7 16.1 closed Percent of firms confirmed permanently closed since 1.2 1.8 3.4 3.7 3.0 2.6 0.8 4.4 COVID-19 pandemic declared Percent of firms confirmed temporarily closed at the 12.8 5.0 3.0 4.1 0.7 0.0 3.0 3.0 time of interview Percent of firms that started or increased online 32.1 39.5 68.0 69.4 66.8 60.2 44.6 96.6 business activity Sales Percent of firms experiencing decreased monthly 90.1 74.1 45.1 47.6 38.0 46.3 38.1 48.2 sales compared to one year ago Average change in monthly sales compared to one -57.1 -29.4 -11.7 -14.9 -4.5 -5.9 -6.7 -14.0 year ago Workforce Percent of firms that decreased total hours worked 74.1 36.7 29.0 36.8 15.2 17.3 32.5 8.6 per week Percent of firms that decreased total number of 13.5 38.4 56.5 57.5 51.3 67.9 53.3 57.9 permanent workers since December 2019 Percentage change of permanent full-time workers -20.2 -16.6 -27.7 -35.3 -13.0 -11.4 -21.3 -30.6 since December 2019 Finance Percent of firms ever experienced decreased liquidity 82.4 87.8 96.5 98.1 93.9 92.1 96.8 96.4 or cash flow availability since COVID-19 began Percent of firms ever delay payments to suppliers, 52.1 64.4 74.5 70.4 86.2 69.6 81.5 71.2 landlords, tax authorities since COVID-19 began Percent of firms that are overdue on obligations to 23.4 34.5 36.7 39.8 27.3 41.6 46.9 31.2 financial institutions Gender Percentage point change since ES in prop perm full- 0.0 0.6 -1.0 -1.0 -1.4 0.2 -3.0 -0.1 time workers that are female Policy Percent of firms that received national or local 1.4 5.2 9.9 4.5 24.0 7.7 10.0 9.8 government assistance Percent of firms that received/expect to receive 3.1 5.2 9.9 4.5 24.0 7.7 10.0 9.8 national or local government assistance Expectations Percent of firms that anticipate falling in arrears on 55.8 37.9 33.3 37.6 17.9 44.9 33.7 33.1 outstanding liabilities Number of months that firms expect will take to 5.5 7.1 5.5 6.1 5.0 2.0 5.2 5.6 return to normal level of sales Number of months firms expect will take to return to 1.5 2.9 2.2 3.0 0.7 0.5 2.1 2.2 normal level of workforce Note: the size and sector information used in the breakdowns are from the baseline ES. The Enterprise Analysis Unit is a World Bank Group team of economists and survey experts specialized in private sector development. Surveys implemented by the team reveal what businesses and firms experience across the world by interviewing representative samples of the formal, non-agricultural, non-extractive, private sector with 5 employees or more. The resulting globally comparable firm-level data is used to construct business environment indicators and measure firm performance. The findings and recommendations help policy makers identify, prioritize, and implement policy reforms that support efficient private economic activity. For more information on the survey visit http://www.enterprisesurveys.org June 24, 2021