Based on the results of surveys of the Russian private sector, the World Bank presented interim estimates of the impact on business of the pandemic and the state support provided to companies. Experts compared the results of the study with data on Italy and Greece, noting the limited nature of aid to Russian companies in the first months of the pandemic, but experts are still warning against evaluating its effectiveness. Although the impact of the pandemic on business in the three countries was comparable, Russian companies experienced a smaller drop in sales, which, however, was accompanied by more massive staff layoffs and delays in payments to suppliers. In general, local companies have managed to respond flexibly to the coronavirus crisis.
The World Bank in the document “Facing the Storm: Impact of COVID-19 on the Private Sector of Russia in 10 Graphs” conducted a comparative assessment of anti-crisis assistance packages to the private sector against the background of COVID-19 in Russia, Italy and Greece and stated the limited scope of state support for Russian companies in the first months pandemics.
At the same time, Russian companies were more skeptical in assessing the possibilities of obtaining state support: in total, the share of those who received assistance, or at least counted on it, in Russia amounted to only 26% versus 57% in Italy and 73% in Greece.
However, experts Nona Karalashvili, Christopher Miller and Tatyana Ponomareva warn that it is too early to assess which solutions were more successful in overcoming the crisis at the company or country level in the short or long term, this will require a deeper analysis.
The most common measures of state support in the Russian Federation were tax benefits and deferred payments – they were received by 77% and 65% of respondents, respectively. At the same time, wage subsidies (24%) or remittances (17.5%) were used much less frequently in the Russian Federation than in Italy (48% and 56%) and Greece (72% and 54%).
How the World Bank offered Russia a choice between vulnerable stagnation and risky growth
The World Bank has also studied the impact of the pandemic on the private sector. The most noticeable effect was a decrease in demand for goods and services: it was reported by 71% of companies in the Russian Federation, 75% in Italy and 81% in Greece. The volume of sales of Russian companies fell by more than a quarter, but their decline in Italy and Greece was more significant – 47% and 37%. Respondents also pointed to deteriorating access to finance – reported by 68% of Russian, 73% of Italian and 71% of Greek companies. As a result, businesses tried to delay payments to suppliers: in the Russian Federation, 35% of companies resorted to this tactic versus 12% and 8% in Italy and Greece. Another tactic was staff cuts: 17.5% of Russian employers reported layoffs of permanent employees versus 10% in Italy, and temporary ones – 36% versus 11.5%, respectively.
Innovative companies that have introduced new products have also suffered noticeably – in itself such a bad start can damage the technological sector in the future, the authors point out. Export-oriented companies survived the crisis better (at least 10% of sales come from the external market): they reduced staff less often, delayed payments to suppliers and were better prepared financially, although it was initially assumed that participants in global supply chains would be among the most affected. Exporters were less likely to use equity financing to solve problems of reduced liquidity and less often to use government support. In general, the authors state that Russian companies were able to respond more flexibly to the crisis. So, in June 2020, on average, one fifth of Russian employees worked remotely, compared with 7% in Italy and 2% in Greece, which can be explained by the sectoral composition of the economies.