At the beginning of the health crisis, the Macedonian Chambers of Commerce clearly emphasized the three priorities, to preserve the health of the citizens, not to lose jobs and the economic measures that will be created to support the real economy, not to allow even a single company to go bankrupt, as a consequence of Covid-19, says President of MCC, Danela Arosovska in an interview for the daily newspaper „Vecer“.
The Macedonian Chambers of Commerce is the voice of the entrepreneurs and last week presented the results of an analysis of the impact the health crisis has. According to your analysis, which sectors are most affected by Covid-19?
At the beginning of the health crisis, the Macedonian Chambers of Commerce clearly emphasized the three priorities, to preserve the health of the citizens, not to lose jobs and the economic measures that will be created to support the real economy, not to allow even a single company to go bankrupt, as a consequence of Covid-19. The engine of the Macedonian economy are the small and medium enterprises that employ over 80 percent of the total number of employed citizens in the private sector. Many of them are family owned businesses and self-employed people who are struggling to keep their jobs and maintain their liquidity.
According to our analysis, companies from all sectors feel the negative effects of the crisis, but those that were closed by government decree are most affected. Companies in the tourism and catering sector, retail, education, private health care and childcare facilities, are the ones that calculate the highest losses because there is no alternative way for them to do business.
At the same time, many entities are struggling with liquidity and job retention, small industrial plants are facing cancellations of orders, overdue payments, reduced production, and they have no income to cover basic monthly expenses.
You recently published a comprehensive study that showed that half of the companies will suffer 100% damage from the corona crisis. How do you assess the government’s economic measures to help the economy, which companies were included in the survey, from which sectors and with how many employees?
Our request to the government before the first package of economic measures was adopted, was for them to be timely, systematic for use by all affected companies, regardless of their primary registered activity. Economic measures need to be created to really help domestic companies, which in this crisis period expected the institutions to protect entrepreneurs who with hard and honest work. earn and pay taxes. It’s important for them to get the support they deserve when they need it most.
Data from the latest survey, which we recently published, on the state of companies and expectations from the government’s economic measures, confirmed what was said from the beginning, that the measures need to be designed according to the needs of the entrepreneurs, not only to be proposed by experts who have theoretical rather than practical knowledge of what is really needed.
The entrepreneurs who participated in the survey are companies of all sizes, of which 73% are micro, 21% are small, 5% are medium sized, and only 1% are large entities, which reflects the national economy, in which 99.8% of the total number of registered legal entities SMEs. The activity covered the sectors catering, tourism, trade, services industry, construction, manufacturing and processing, accounting and finance, transport and logistics, health and agriculture.
The results show that 99% of the companies suffer losses to a certain extent, and most of the companies, ie 86% of the respondents believe that the economic measures adopted by the Government are not in line with the needs and will not meet the goal of overcoming the situation.
Are there layoffs and what is the number? In this regard, can interest-free loans from the Development Bank help companies with wages and improve liquidity?
Everyone wants to continue working and keep the jobs, because a lot of effort and resources have been invested to start working in the private sector, a lot has been invested in gaining experience, knowledge and skills. However, the situation is extremely uncertain and as a result of the damage, the generated costs and the reduced volume of work, it is expected that the number of jobs will be reduced.
The MCC latest analysis shows that 85% of companies have not yet reduced their number of employees, and as a result of the situation, 15% have already reduced their workforce. If the set of measures does not show results and there are no new appropriate economic support measures, which will provide real help to preserve jobs, as many as 46 percent of companies said they plan to reduce the number of jobs. The main reasons are problems with liquidity thus lack of funds to pay salaries, because some companies have no income, and at the same time are burdened with other costs, debts and loans.
The loans from the Development Bank as pointed out by many companies will not be used by them, because it will mean new borrowing, in addition to their existing loans. Many are facing the challenge of surviving. Uncertainty is rising, creditworthiness is declining, so it is possible that the grace period for repayment of loans from the Development Bank will pass, and companies will still not be in optimal condition to be able to repay both new and old loans.
Parliamentary elections are announced in June. Do you think that the elections this year will further deepen the crisis in the economy?
Elections in our country are always a brake on economic processes, even when economic conditions are not further aggravated by crisis as it is now. Elections are also a significant expense of the state budget, which is currently not in good shape. According to the public announcement, if there were elections in April, they would have cost almost as much as the budget for the crisis help credit line of the Development Bank. This means that if elections are held, certain amount will have to be provided with new borrowings and will go for that purpose, instead of focusing on solving real economic problems and getting out of the current crisis faster. We are continuously in elections, early, parliamentary, local, presidential. New elections mean new uncertainty and focusing on politics instead of economy. At this point with the health and economic crisis, new elections should not be a priority.
How soon will the economy be rehabilitated and return to the state it was in before the corona crisis?
How quickly the economy recovers from this crisis will also depend on the systemic measures for economic rescue expected from the government institutions. The private sector will certainly get back on track much sooner if it is given real support, rather than quasi-measures that are just lending to already indebted entrepreneurs.
In the latest report, the World Bank drastically revised its projection for economic growth in a very short period of time, which, unlike the previous report and the data from April 9, when the projection was a decline of 0.4%, now project a downward correction and a decline of 1.4 up to 3.2%. This drastic revision is probably the product of insufficient or inadequate information available, as the economy is experiencing a sharp decline in all parameters. Two weeks ago, the Macedonian Chambers of Commerce confirmed the projection for a 4% decline that was in line with the IMF projection, and we predict that the downward trend will continue, making the recession inevitable, as gross domestic product is expected to have negative economic growth in the next quarter as well. These indicators show that the negative consequences of this crisis will spill over into 2021.