Regional Economic Prospects-April 2020; Covid-19: From shock to recovery

Regional Economic Prospects-April 2020; Covid-19: From shock to recovery

Regional Economic Prospects-April 2020; Covid-19: From shock to recovery

Thursday, April 9, 2020 by Western Balkans 6

Regional Economic Prospects-April 2020; Covid-19: From shock to recovery

Thursday, April 9, 2020 by Western Balkans 6

Growth in the EBRD regions averaged 2.6 per cent in 2019, down from 3.4 per cent in 2018 and 3.8 per cent in 2017, mirroring the ongoing slowdown in global growth and global trade growth.

The Covid-19 pandemic hit on top of this deceleration and is expected to result in a substantial output contraction, at least in the near term. Numerous countries in the EBRD regions and across the world have closed their borders to people, closed schools, universities, restaurants and shops, a growing number of countries have implemented lockdowns and curfews. These measures severely affect domestic demand (as a major part of aggregate consumption involves public gatherings) and domestic supply (as workers stay at home) likely resulting in the greatest disruption to global economic activity since the Second World War.

The economic impact of domestic containment measures is compounded by several related external shocks, whereby economies in the EBRD regions face much lower commodity prices, lower demand for exports across the board and disruptions to value chain linkages, as well as a collapse in tourism and business travel. Tourist spending exceeds 20 per cent of GDP in a number of economies in the region including Albania, Croatia, Cyprus, Georgia, Greece and Montenegro.

The vulnerability of economies depends on many factors, including the structure of production, the share of workers on permanent contracts and in the informal economy, and governments’ ability to provide relief. Many governments have provided additional liquidity to the financial system and provided guidelines on forbearance to enable restructuring and extension of loans and introduction of temporary holidays when it comes to repayment of loans. Many governments have also pledged large-scale fiscal support to individuals and firms experiencing loss of income with the view to avoid mass layoffs and facilitate a speedy recovery once consumption restrictions are lifted. Fiscal space to implement such policy measures varies by country.

Assuming domestic containment measures remain in place for a few months followed by a gradual relaxation and return to normality during the second half of the year, output in the EBRD regions is likely to contract in 2020 (individual country forecasts will be released on 13 May 2020). Once the outbreak is contained, a swift recovery is possible provided mass layoffs during the containment phase can be avoided. This scenario assumes OVERVIEW 2 a modest impact of the crisis on the long‐term trajectory of output. However, there may in fact be significant longer term economic, political and likely social impacts. If lockdowns remain in place for much longer, the economic impact will be significantly deeper.

In the longer term, the Covid-19 crisis may also lead to reassessment of concentration risks in global manufacturing, perhaps leading to a new emphasis on diversification and reshoring. This could open new business opportunities for companies in the EBRD regions. View PDF

Article by Western Balkans 6

World Business Report: 25% of US small businesses could close

World Business Report: 25% of US small businesses could close

World Business Report: 25% of US small businesses could close

Tuesday April, 7, 2020 by BBC World Report

World Business Report: 25% of US small businesses could close

Tuesday April, 7, 2020 by BBC World Report

Blind Optimism for the Unforeseeable Future

The BBC World Business Report released a broadcast that described a wide array of perspectives on the financial and social consequences of COVID-19. After interviewing Neil Bradley, we understand that about one in ten businesses are less than a month away from shutting down completely, and despite federal and state spending, some businesses will not be able to come back from their current deficit. Following Bradley’s statement, Dr. Ayman El Tarabishy of the International Council for Small Business describes our collective movement towards a new normality. He comments on our current situation by enlightening the audience to the hurt of small businesses. Enterprises, housing only four to five employees, are those that often survive financially on a month-to-month basis. Additionally, El Tarabishy comments on how even large businesses who have invested in the upcoming spring season will feel this crisis. Throughout this moment, the unknown of time is the most important variable. Dr. El Tarabishy indicates that companies would have an easier time adjusting to this moment of loss, if they were able to define an end date and work backwards in adjusting their income structure. However, definitive time is not a luxury for which our current crisis allows. As about two trillion dollars are coming from the government, most businesses, who without aid would be severely suffering, are feeling grateful to stay open and be able to pay their employees properly. However, what will happen when it is time to pay the April paychecks? This conversation must also include a monetary percentage, therefore if businesses are able to pay their employees with the help of the government this month, they will have to replay this scene again next month. Luckily, according to Dr. El Tarabishy, small businesses are known to try to first take care of their employees. 

The presenter then asks Dr. El Tarabishy if this shut down is too large a price to pay for the pandemic, to which El Tarabishy immediately responds “no.” He states that small businesses are based in humane entrepreneurship, and while there are those who will see this virus in a negative light, there are others that will note how their enterprise’s sacrifice was made for humanity. It is this change in the narrative that will shift the way that the next generations view this moment in history. Small businesses are resilient, and that resilience shines brightest in moments of crisis, like that of today. That spirit will hopefully work concurrently with a long term plan set forth by the government. As it seems impossible to predict the future, especially as we find ourselves in such a volatile state, only the evolution of time will determine if large spending during this period will be worth it. Dr. El Tarabishy notes that if people are willing to sacrifice in the short term for their long term survival, they often need to know how long that short term period will last. This uncertainty leaves us individuals with a choice. One in which we can choose to wait for the worst or another in which we can show our true resilient humanity. (Listen to the report here)

Reference broadcast: 25% of US small businesses could close 

-BBC World Report

Demography is Not Destiny: Age, Gender and Entrepreneurial Activity

Demography is Not Destiny: Age, Gender and Entrepreneurial Activity

Demography is Not Destiny: Age, Gender and Entrepreneurial Activity

Monday, April, 6, 2020

Demography is Not Destiny: Age, Gender and Entrepreneurial Activity

Monday, April, 6, 2020

The effects of Gender on Entrepreneurial Activity

In each of the economies participating in the GEM research, the sample of adults interviewed in the Adult Population Survey (APS) is carefully structured to reflect the age, gender and locational distribution of the overall population of the specific economy, so that the sample is as representative as possible.

This chapter considers two key characteristics of any given population that may have a significant influence on the level of entrepreneurial activity: gender and age. This chapter will show that, in most economies, the oldest age group (55–64) has the lowest levels of Total early-stage Entrepreneurial Activity (TEA). But there are five economies where the youngest age group (18–24) has the lowest levels of TEA, as well as four economies where this youngest age group has the highest level of TEA. Overall, in many economies the propensity to be involved in starting or running a new business first increases and then decreases with age.

While men have traditionally been more likely than women to start new businesses, increasing female participation in entrepreneurship is an important policy objective in many countries. Examples include the adoption of policies to support women entrepreneurs in Canada, and a focused women’s entrepreneurship initiative in Germany. In Ireland, the OECD review of SME and Entrepreneurship Policy noted the untapped potential of women entrepreneurs, while the government in North Macedonia has recently adopted the Strategy and Action Plan for Women Entrepreneurs 2019–2023. Madagascar has a new gender-based policy to support women entrepreneurs (the Fiharianna Policy Initiative) (Read more…).

How Taiwan has become a COVID-19 success story

How Taiwan has become a COVID-19 success story

How Taiwan has become a COVID-19 success story

Sunday, April, 5, 2020 by PBS NewsHour

How Taiwan has become a COVID-19 success story

Sunday, April, 5, 2020 by PBS NewsHour

As the coronavirus pandemic spreads around the world, Taiwan seems to have it under control. The island is only 80 miles off the coast of mainland China and very near to where the virus originated; plus there were many daily flights to it from Wuhan. But Taiwan has only 329 confirmed cases of COVID-19, and only five people have died from it. Nick Schifrin reports on this COVID-19 success story.

Strategic Responses to Crisis

Strategic Responses to Crisis

Strategic Responses to Crisis

Saturday, April, 4, 2020  by Matthias Wenzel, Sarah Stanske, and Marvin Lieberman

Strategic Responses to Crisis

Saturday, April, 4, 2020  by Matthias Wenzel, Sarah Stanske, and Marvin Lieberman

Currently the pandemic crisis is affecting the lives of people and organizations around the world. As the coronavirus continues to spread, more and more governments are implementing strong measures to save people’s lives, such as the prohibition of events, lockdowns, and shutdowns. These measures contribute to slowing down the spread of the coronavirus in order to avoid lethal capacity overloads of national healthcare systems. At the same time, they threaten the survival of firms across all sectors and industries at a global scale—with potentially devastating individual, societal, and economic outcomes, such as massive job losses and social precarity. Therefore, the corona crisis raises important questions about how firms can respond effectively to crises such as the current pandemic.

In this Virtual Special Issue, we gather and discuss key articles published in the journals of the Strategic Management Society (SMS) that shed light on how firms respond to crisis. Our overview focuses on 13 articles that substantially inform our understanding of this issue.

Based on our overview, we identity four strategic responses to crisis: retrenchment, persevering, innovating, and exit. Retrenchment refers to cost-cutting measures that potentially reduce the scope of a firm’s business activities. Persevering relates to the preservation of the status quo of a firm’s business activities in times of crisis, e.g., through debt financing and the consumption of available slack resources. Innovating refers to conducting strategic renewal in response to crisis. Exit refers to the deliberate discontinuation of a firm’s business activities.

This virtual special issue extends understanding of strategic responses to crisis for both strategy scholars and practitioners. The main contribution of this Virtual Special Issue to strategy research is to make sense of the burgeoning work on strategic responses to crisis by developing a taxonomy, one that surfaces “time horizon” as an important dimension when considering the value of such responses. This taxonomy opens up promising directions for future research, especially on the temporal dynamics of responding to crisis in time as well as shifts between strategic responses to crisis over time.

For managers, this Virtual Special Issue raises awareness of the variety of potential responses that managers have available. It also raises doubts concerning the effectiveness of retrenchment as a common but rarely effective strategic response, especially when crises last longer. Importantly, this Virtual Special Issue also includes exit as a strategic response to crisis. As this virtual special issue highlights, an exit may not be the end of the road, as often assumed, but the starting point of a new venture, one that is able to do justice to the changed business conditions that the crisis has created.

Read more papers included in the Virtual Special Issue

Article Featured from the SMS Blog