International responses to the economic impact of the pandemic

24/ 04/ 2020

Yesterday, there was an international discussion Global Challenges & Local Responses initiated by the European Business Association. Together with business representatives from six countries, we discussed current economic issues at the global and national levels, effective support measures for local companies, and plans for business development after the crisis. View the discussion on Facebook Thus, Vladimir Zuberec, Directorate-General for the Internal Market, Industry, Entrepreneurship and SMEs at the European Commission reported on the situation in Belgium. Currently, the country is under lockdown, and companies have switched to working remotely. In a few weeks, Belgium planned a gradual opening of schools and other institutions, in compliance with all the rules of personal protection. At the same time, he stressed that one-third of SMEs are currently in danger of closing, therefore the urge to ease the lockdown is becoming stronger. In general, the German business community approved the governments decisions to support the economy during the pandemic. Stefan Kaegebein, Regional Director of Eastern Europe, German Eastern Business Association, said that not all companies have to suspend their operations during the lockdown. The obligatory closing was required for restaurants, hairdressers, and similar businesses, where it is difficult to minimize physical contact between people. At the same time, there is no complete closure of economic activity. To prevent layoffs, the German government has launched a program to partially compensate workers salaries, including payroll taxes. So, about 700,000 German companies have already applied for compensation, and currently, 3 million workers receive their salaries under this scheme. Also, the scale of German anti-crisis programs is impressive. Thus, a fund of 600 billion euros was created to stabilize the economy. In addition, the state will allocate 50 billion euros to support small businesses and individual entrepreneurs. The measures taken by the Finnish government to tackle the crisis were also highly appreciated. According to Lauri Veijalainen, CEO, East Office for Finnish Industries, the authorities pay due attention to problems of the local business. For example, retailers were provided with the financial support of 100,000 euros. However, despite all measures, the Finnish GDP is expected to fall by approximately 10%, and it will take years to recover some economic sectors (for example, 2 years for aviation, 3-4 years for the hotel industry). Currently, like any other country, Finland has to decide on when and how to ease the lockdown. At the same time, as for any business, it is important to boost consumer confidence. Unlike most countries, Australia did not implement a tough quarantine regime. Even though companies are not forced to close, Australian employees choose to work remotely to feel safer. Therefore, Australias economy will be also affected by the lockdown measures. Jason Collins, a CEO, European Australian Business Council Chair, European Business Organizations Worldwide, predicted that there would be a 10% drop in economic growth this year. At the same time, the level of unemployment in the country has increased, though not significantly – currently it amounts to 10%, while before the lockdown it was 5%. Also, the Australian government plans to introduce a stimulus package equivalent to 16% of the countrys GDP to support the economy, for example, with wage compensation programs for companies that have lost more than 30% of their income due to the lockdown but choose not to dismiss their workers, etc. As of now, 3 million businesses have registered for this support program. Although the Korean government was able to keep the coronavirus situation under control, the epidemic will still have a negative impact on the countrys economy, for example, the FDI fell by 16% in Q1. Sven-Eric Batenburg, Director of Legal & International Affairs, European Chamber of Commerce in Korea, emphasized that SMEs appeared to be the most vulnerable in times of economic turbulence. Also, Korea is a very export-dependent country and in the first 20 days of April, there was a 27% drop of trading activities. At the same time, the state is trying to support the business. Thus, the size of the state support programs in Korea is comparable to 13% of the countrys GDP. The pandemic has significantly worsened Argentinas economy, which has struggled to recover after the default. Geraldine Smeets, Executive Director, Eurocamara Argentina, and Secretary-General (EBO Worldwide Network) was concerned that due to the coronavirus situation, the countrys inflation rate could double from the current 35% to 60%. Also, as a result of the crisis, there are 35 thousand small and medium-sized enterprises facing serious problems in Argentina, but only 5,000 of them received financial aid from the state, namely, credits with the interest rate of 24%. According to Ms. Smith, the level of unemployment is expected to increase significantly after the lockdown in Argentina. As a conclusion, in order to tackle the crisis and ensure further economic development, it is important to have effective governance. Therefore, we hope that the authorities of different countries will make smart and thoughtful decisions to overcome this crisis with minimal losses. On behalf of the European Business Association, we thank the speakers for participating in this interesting dialogue and giving insights into their local businesses and national economies.

View the discussion on Facebook

Thus, Vladimir Zuberec, Directorate-General for the Internal Market, Industry, Entrepreneurship and SMEs at the European Commission reported on the situation in Belgium. Currently, the country is under lockdown, and companies have switched to working remotely. In a few weeks, Belgium planned a gradual opening of schools and other institutions, in compliance with all the rules of personal protection. At the same time, he stressed that one-third of SMEs are currently in danger of closing, therefore the urge to ease the lockdown is becoming stronger.

In general, the German business community approved the government’s decisions to support the economy during the pandemic. Stefan Kaegebein, Regional Director of Eastern Europe, German Eastern Business Association, said that not all companies have to suspend their operations during the lockdown. The obligatory closing was required for restaurants, hairdressers, and similar businesses, where it is difficult to minimize physical contact between people. At the same time, there is no complete closure of economic activity. To prevent layoffs, the German government has launched a program to partially compensate workers’ salaries, including payroll taxes. So, about 700,000 German companies have already applied for compensation, and currently, 3 million workers receive their salaries under this scheme. Also, the scale of German anti-crisis programs is impressive. Thus, a fund of 600 billion euros was created to stabilize the economy. In addition, the state will allocate 50 billion euros to support small businesses and individual entrepreneurs.

The measures taken by the Finnish government to tackle the crisis were also highly appreciated. According to Lauri Veijalainen, CEO, East Office for Finnish Industries, the authorities pay due attention to problems of the local business. For example, retailers were provided with the financial support of 100,000 euros. However, despite all measures, the Finnish GDP is expected to fall by approximately 10%, and it will take years to recover some economic sectors (for example, 2 years for aviation, 3-4 years for the hotel industry). Currently, like any other country, Finland has to decide on when and how to ease the lockdown. At the same time, as for any business, it is important to boost consumer confidence.

Unlike most countries, Australia did not implement a tough quarantine regime. Even though companies are not forced to close, Australian employees choose to work remotely to feel safer. Therefore, Australia’s economy will be also affected by the lockdown measures. Jason Collins, a CEO, European Australian Business Council Chair, European Business Organizations Worldwide, predicted that there would be a 10% drop in economic growth this year. At the same time, the level of unemployment in the country has increased, though not significantly – currently it amounts to 10%, while before the lockdown it was 5%. Also, the Australian government plans to introduce a stimulus package equivalent to 16% of the country’s GDP to support the economy, for example, with wage compensation programs for companies that have lost more than 30% of their income due to the lockdown but choose not to dismiss their workers, etc. As of now, 3 million businesses have registered for this support program.

Although the Korean government was able to keep the coronavirus situation under control, the epidemic will still have a negative impact on the country’s economy, for example, the FDI fell by 16% in Q1. Sven-Eric Batenburg, Director of Legal & International Affairs, European Chamber of Commerce in Korea, emphasized that SMEs appeared to be the most vulnerable in times of economic turbulence. Also, Korea is a very export-dependent country and in the first 20 days of April, there was a 27% drop of trading activities. At the same time, the state is trying to support the business. Thus, the size of the state support programs in Korea is comparable to 13% of the country’s GDP.

The pandemic has significantly worsened Argentina’s economy, which has struggled to recover after the default. Geraldine Smeets, Executive Director, Eurocamara Argentina, and Secretary-General (EBO Worldwide Network) was concerned that due to the coronavirus situation, the country’s inflation rate could double from the current 35% to 60%. Also, as a result of the crisis, there are 35 thousand small and medium-sized enterprises facing serious problems in Argentina, but only 5,000 of them received financial aid from the state, namely, credits with the interest rate of 24%. According to Ms. Smith, the level of unemployment is expected to increase significantly after the lockdown in Argentina.

As a conclusion, in order to tackle the crisis and ensure further economic development, it is important to have effective governance. Therefore, we hope that the authorities of different countries will make smart and thoughtful decisions to overcome this crisis with minimal losses.

On behalf of the European Business Association, we thank the speakers for participating in this interesting dialogue and giving insights into their local businesses and national economies.