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Economy and Pandemic "Interviewing the chambers of commerce" - locals issue nr. 5

SUMMARY

The pandemic are changing the world economy, and it impacts also the stock markets. The FTSE, Dow Jones Industrial Average and the Nikkei all saw huge falls as the number of Covid-19 cases grew in the first months of the crisis. The major Asian and US stock markets have recovered following the announcement of the first vaccine in November, but the FTSE is still in negative territory.

Many people have lost their jobs or seen their income cut. In the United States, the proportion of people out of work hit a yearly total of 8.9%, according to the International Monetary Fund (IMF), signalling an end to a decade of jobs expansion. Millions of workers have also been put on government-supported job retention schemes as parts of the economy, such as tourism and hospitality, have come to a near standstill. The numbers of new job opportunities is still very low in many countries. Job vacancies in Australia have returned to the same level of 2019, but they are lagging in France, Spain, the UK and several other countries.

If the economy is growing, that generally means more wealth and more new jobs. It's measured by looking at the percentage change in gross domestic product, or the value of goods and services produced, typically over three months or a year. The IMF estimates that the global economy shrunk by 4.4% in 2020. The organisation described the decline as the worst since the Great Depression of the 1930s. The only major economy to grow in 2020 was China. It registered a growth of 2.3%. The IMF is, however, predicting global growth of 5.2% in 2021. That will be driven primarily by countries such as India and China, forecast to grow by 8.8% and 8.2% respectively. Recovery in big, services-reliant, economies that have been hit hard by the outbreak, such as the UK or Italy, is expected to be slow.

Observing this global situation, it appears interesting to research information at local level. Our LOCALS students, under the coordination of their teachers, interviewed the local Chamber of Commerce. The finality of these interviews is to know what impact the pandemic has generated in the local job market.

PALERMO (SICILY) - INTERVIEWING THE LOCAL CHAMBER OF COMMERCE

About 30 per cent of Italy’s population have suffered a fall in their household income as a result of measures taken to contain the virus, recent research by the Bank of Italy found. The worst affected are those living in the country's south, in particular the most vulnerable, those living on the ouyskirts of cities and in rural areas and those engaged in Italy's vast informal and undocumented economy, according to economist. Speaking with Ms Lo Verso, in Sicily the lockdown was a catastrophe for many people and entrepreneurs. The most effected were who had a precarious economic situation, even if the last economic measure called "Reddito di Cittadinanza" has helped these people to live during the pandemic.

According the local Camera the economic consequences of this situation could last for several years, especially in the south of Italy, and could be stronger for the yourger and less qualified section of the population.

Traders and entrepreneurs strike against restrictive measures - PA-LIVE source

1) - How has the coronavirus (COVID-19) impacted local businesses? In the province of our responsibility, the pandemic generated several impacts on the local commerce. The most important impact is represented by 80.000 companies at risk of closure with the lost revenue for all sectors. 2) - Which areas were most affected? the most affected areas were the sporting organisation, subjects to charging VAT, and in general all entrepreneurs that have changed their job to offer services at the new pandemic status. 3) How prepared were businesses, from a continuity perspective, to manage disasters such as COVID-19? We hadn’t any preparation and organisation to strengthen the pandemic situation. The closure of the activity was a necessity to reduce the level of dissemination of the pandemic at the local level. Now, we have the vaccine and it is more simple to manage the opening of the commercial activity than one year ago.

4) What kind of support was set by local authorities/the government? The economic support was equilibrated looking at the real exigences and problems of traders and entrepreneurs. The national government and the regional governors supported immediately the exigences coming from the population giving contributes and helps. The mechanism of the economic support to people without a job was applied immediately, and the same instruments were activated for the VAT. 5) What impact will the crisis have on business continuity plans? The impacts were important and dangerous at the beginning of the pandemic situation, but for the future the situation is different from the past e from our initial predictions. Sicily is a region with an economy founded on tourism and local products to be exported in markets outside the EU. Tourism is the driving force then, sharing the tourism I think that the economic situation will return to be normalised.

6) When do you predict things will get back to the "new normal"? When the national government will give the possibility to people to travel, and when all citizens will receive their vaccine. 7) - What advice do you have for local business owners? Looking at the pandemic situation, a lot of commercial activities changed their business model to survive in the new exigencies of the lockdown. Many restaurants activated the takeaway service for example, and the rest of the commercial activities adopted the measures to work in security. I think the covid as an opportunity to change our lifestyle, and to change what is old with new and modern solutions integrated with the new technologies offered by mobiles and network.

RAMNICU VALCEA (ROMANIA) - INTERVIEWING THE LOCAL CAMERA OF COMMERCE

Mr. Gheorghe Rizoiu, General manager of the Chamber of Comerce Vâlcea, answered our questions about the impact of Covid-19 Pandemic on local businesses

1) How has the coronavirus (COVID-19) impacted local businesses? We are going through a very difficult time, not only us, but states around the world. This has an important impact on the national and local economy. The economic impact of the coronavirus crisis it is felt different from one industrial sector to another and from one enterprise to another. It depends on a number of factors, including the ability to adapt to disruptions on the chain supply, the existence of stocks or dependence on the production processes "just in time". 2) Which areas were most affected? The most affected local economic sector by the pandemic, is tourism. What saved us somewhat is the spa tourism where the activity continued on the one hand, and the support provided by the government on the other hand. 3) How prepared were businesses, from a continuity perspective, to manage disasters such as COVID-19? It depends on each sector, on each company and on how they have been able to use this time for almost a year, in creating a vision of sustainable development. What can I say is that our country went through a difficult situation from an economic point of view in 2008, but now it seems to have acted better. The government's policy has been to encourage full investment. We'll see what the results are.

4) What kind of support was set by local authorities/the government? The largest local investment during the pandemic is the manufacturer of thermal insulation panels TOPANEL from Râmnicu Vâlcea, which achieved a turnover of over 15% in 2020 compared to the previous year. Another investment is in Drăgășani. The CEO of Coșkunöz Holding invested in December 2020 24 million euros in a factory that will produce parts for the next DACIA model to be launched by Renault. Chimcomplex, a regional chemical company with a turnover of over 260 million euros in 2019, completed in 2020 an investment of 35 million euros that provided 200 jobs. There are other smaller investments in Roești, Berislăvești, Dănicei, Popești, Lăpușata, all with European money in: health, rehabilitation of schools, sewage treatment plants, natural gas projects (each being in different stages of implementation).

5) What impact will the crisis have on business continuity plans? As I said before, it depends on each company, the vision and the capacity to adapt at the situation. For many business owners, the Coronavirus pandemic came on fast and hard. Most business owners weren't prepared for the directives that followed once COVID-19 took hold—mandatory storefront closures, consumer lockdowns - quick operational shifts were needed to accommodate social distancing and contactless transactions. Not all business owners, however, were impacted equally. Firms that had a business continuity plan in place were better able to survive the adverse effects of COVID-19. Those that took steps to implement a crisis management plan not only better adapted to the global crisis but have also found themselves more resilient as they forge on in an uncertain economy.

6) When do you predict things will get back to the “new normal”? The reality, though, depends much on how you define "normal." And, if enough Romanian step up for the vaccine, it might not be as depressing as you think. At the end of April 2021, the vaccination rate on Vâlcea county is 25 % of the population. This is a good sign for the local businesses. Experts say fall could become the season of a "new normal" in which the world slowly reopens and people will reconnect but with masks, routine testing and possibly even vaccine cards to allow them enter movie theaters or restaurants. When times are tough, it’s only natural to wish for a return to normality. But we live in a complex and interdependent world, so nothing is ever quite the same as before, even after the storm has passed. What exactly the new normal will look like is uncertain.

people strikes against the restrictions pro-Covid

7) What advice do you have for local business owners? In today’s economy, the risks of a structural crises are big. If retailers, hospitality and travel companies are allowed to go bankrupt, the rebuilding costs will be huge and the impact on communities will be long-lasting. This is why the governments are spending on furlough and loan schemes to keep such businesses going. But even with these generous schemes, some businesses will perish. While a few companies have pledged to allow virtual working to continue post-pandemic, most are gearing up for a hybrid model, with people working from home maybe half the time, and careful consideration being given to getting the most out of their time together in the office. To adapt, small businesses have to do some adjustments that include the following: a) Using contactless deliveries to make their services available; b) Asking employees to learn new skills to support changes to the business models; c) Adopting new revenue streams, such as converting production lines to make hand sanitizer, which is in high demand; d) Instituting new safety measures, such as installing Plexiglas barriers between staff and customers; e) Adopting new technology processes. There have been obvious changes in consumer behavior since the pandemic started, and while some are clearly temporary (I don’t want to meet forever my friends for a drink over Zoom – I want to go to the restaurant) others are likely to endure because they are efficient like online shopping, so the shops must take tis in consideration as a part of their future marketing plans. I must say, at the end, that small-business owners are confident that their business will be better prepared to handle a crisis like COVID-19 if it occurred in the future.

VILA NOVA (PORTUGAL) - INTERVIEWING THE LOCAL TRADERS AND INDUSTRIAL ASSOCIATIONS

Interviewing Mr Bruno Marques, Director of the Communication Department of the Local Association,

1) How has the coronavirus (COVID-19) impacted local businesses? The impact on local commerce was big because commerce and services were forced to close during the two lockdowns, which made it impossible to have a normal economic activity. The only option was to sell online, for those who could do so. Many business owners became dependent on the financial support of the government to survive. 2) Which areas were most affected? Some businesses such as bars, clubs, coffee shops, and restaurants were definitely the most affected. Besides, the clothing, accessory, and fashion industries have also suffered an 80/90% profit loss in their revenue. 3) How prepared were businesses, from a continuity perspective, to manage disasters such as COVID-19? No activity is prepared to close and not receive clients in their stores. There are alternative ways to compensate this situation such as online commerce, when the presence of clients is not essential to establish commercial trades or deliver a service.

Lisbon, people strike against the restrictions

4) What kind of support was set by local authorities/the government? The financial support of local authorities or the government as well as the moratoriums and the postponement of deadlines concerning tax obligations allowed companies to minimize expenses and maintain salary payments and jobs. 5) What impact will the crisis have on business continuity plans? The crisis caused by COVID19 will force many business owners to rethink their business plans, especially in terms of expansion and growth. The focus will be the maintenance of their activity. Unfortunately, this crisis will also be the end of the business for many people. 6) When do you predict things will get back to the “new normal”? The process to reach the new normal will be slow and with progress and setbacks. This apparent new normality will likely happen at the end of 2021 and the beginning of 2022, but nothing is certain at this point.

7) What advice do you have for local business owners? The best advice is to create several alternatives to develop their activity, namely, to invest in digital/online commerce and in the digitalisation of their business at various levels. This will allow business owners not only to keep the business running but also to broaden horizons to reach a wider range of potential clients and consumers.

BRZOZOW (POLAND) - INTERVIEWING THE LOCAL CHAMBER OF COMMERCE

Poland's economy is less affected by the pandemic and is recovering quicker from it. Small wonder German firms seek to tap into this growth potential, and aiming to profit from Poland's economic transformation ahead. Economy Minister Jaroslaw Gowin has told the German business daily Handelsblatt recently: "Many Polish companies have used the pandemic to reorganize themselves, digitize more and step in where other supply chains have been torn down." In 2020 Poland´s economic contraction due to the coronavirus pandemic was 2.8%, much less deep than the average recession of EU member states of 6.4%. This rather low decrease is due to the fact that Poland´s economic performance is less dependent on exports, compared to its Central European peers like the Czech Republic, Hungary or Slovakia. At the same time, private consumption accounts for 58% of GDP, reducing the vulnerability to external shocks (as evidenced by the avoidance of a recession during the 2009 credit crisis).

In 2021 the economy is forecast to rebound by 3.8%, given that the current surge of coronavirus infections can be contained and the vaccination process is rolled out in time. Private consumption is expected to increase 3.5% after decreasing by the same figure in 2020. Increased government payments to families (e.g. a child benefit programme) and pensioners, along with tax breaks, continue to sustain private consumption, while unemployment is expected to level off. Polish exports are forecast to rebound strongly by 9% after a 1.9% contraction in 2020, supported by resurging demand from the Eurozone. Industrial production and investment are expected to grow by 10.6% and 3.2% respectively this year. Interviewing a member of the traders' association we had a more detailed situation about their condition in the pandemic time.

1) How has the coronavirus (COVID-19) impacted local businesses? Covid 19 had severe impact on the majority of local businesses, forcing them to quickly find a way to comply with implemented restrictions and at the same time, allow them to keep the business running. Depending on the branch, some had more difficulties than others and all were at some point struggling to stay afloat. 2) Which areas were most affected? The most affected branches were those that could not really function, like hotels. Restraurants, shops could still function, but circumstances forced the owners to offer delivery of their product or to move online. 3) How prepared were local businesses, from a continuity perspective, to manage disasters such as COVID-19? Some were well prepared, having been offering the services even prior to lockdowns. Some other had to restrict their activities, implement furloughs and seek the local or central governments’ help. It is hard to provide precise numbers, as the threat is not yet over – it will probably take another six months at least to provide good estimate what percentage shut down, and how much it affected local the communities’ lives. 4) What kind of support was set by local authorities/the government? Support offered by local or central government ranged from tax exemptions to actual financial support based on application to the special programs. Not all businesses were eligible for all kinds of such support.

5) What impact will the crisis have on business continuity plans? We believe this is yet not clear, but judging by the GDP growth, there will be some negative consequences. At the same time, however, our belief is that with vaccination efforts underway, once the number of vaccinated citizens is high, there is good possibility of a quick return to the growing path. 6) When do you predict things will get back to the “new normal”? This will again depend on the branch. Some are likely to recover quickly (like tourism), but others may take several years to actually return to stability. In some areas, we may actually see that some things may stay for good. 7) What advice do you have for local business owners? I am not sure if it is advice, because those who keep their business running till now, probably know better than anyone how to survive. I believe that, in a way, local and central governments should listen more to the voice of business owners as to what is an obstacle and what is helpful in running the business under pandemic conditions and we should all work together to remove obstacles out of the way

VILNIUS (LITHUANIA) - INTERVIEWING THE LOCAL CHAMBER OF COMMERCE

Interviewing Mr Bogdan Trafimov, member of the local Chamber.

1) How has the coronavirus (COVID-19) impacted local businesses? The coronavirus pandemic has affected all areas of the business to varying degrees. Many office workers were able to adapt to remote work - using video communication services, task trackers, and other technological solutions. Other industries are just trying to get back on their feet - restaurants, and hotels, for example. Covid-19 had a severe impact on Lithuanian business - almost 87 percent of companies felt the negative effects of coronavirus; business incomes fell as the quarantine lifted, with the vast majority expecting a negative economic environment but trying to retain workers. 2) Which areas were most affected? In my opinion, the sectors most affected by the COVID-19 virus in Lithuania were cultural and artistic sectors as well as travel, health and social service companies, retail, service and wholesale sectors. 3) How prepared were businesses, from a continuity perspective, to manage disasters such as COVID-19? In the first wave of coronavirus, businesses were not so prepared like they are now, circumstances force them to adapt quickly if they want to survive. 4) What kind of support was set by local authorities/the government? As was mentioned before, the government helps with financial support to help businesses stay afloat. Self-employed persons registered with the Employment Service receive a benefit of EUR 257 for a full month and workers got minimum salary set by the government. 5) What impact will the crisis have on business continuity plans? They can't make big plans due to the obscurity of how things will be. I hope the government helps them to make it through the crisis. 6) When do you predict things will get back to the "new normal"? Hard question to answer and predict. I hope if the vaccination goes well, in the nearest future we can get back to normal life. 7) What advice do you have for local business owners? Promote your takeout services on social media, run ads, send emails, and even consider building a whole campaign around it, Be open with your audience and communicate with them the challenge you are facing and that your business needs support. Promote your gift cards, personal training packages, class punch cards, or even branded merchandise.

INCA (BALEARI ISLAND) - INTERVIEWING THE LOCAL CHAMBER OF COMMERCE

Spain’s economy shrank 11% in 2020, according to data released on Friday by the National Statistics Institute (INE). This is the biggest contraction since the days of the Spanish Civil War in the late 1930s. This dismal figure is a result of the restrictions imposed last year to curb the spread of the coronavirus, particularly the 94 days of strict home confinement that nearly brought the economy to a halt between March and June. Economic output fell 17.8% in the second quarter, and even though there was some recovery during the second half of the year, it was not enough to make up for the damage. Output grew by a historic 16.4% in the third quarter after the country emerged from lockdown, but the second and third waves of the pandemic reduced this growth to 0.4% in the last three months of the year, according to INE data. This growth saved the economy from a full-blown recession, but while the most optimistic forecasts hold that Spain will be back at pre-pandemic levels in late 2022, most experts believe that the summer of 2023 is a more realistic date. The Spanish government, led by a center-left coalition of the Socialist Party (PSOE) and Unidas Podemos, had estimated a GDP contraction of 11.2% in 2020, and it is now forecasting a 7.2% rebound in 2021 without factoring in the impact of European recovery funds. If Spain is able to successfully manage and invest the nearly €30 billion in reconstruction aid pledged by Brussels for this year, the economy could grow by as much as 9.8%, according to the executive’s estimates.

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