On November 21, 2020, Stepan Zemtsov, Senior Research Associate, Gaidar Institute delivered the report “COVID-19, Small Business and State Support in Russia” within the framework of the international scientific conference “The World Amid COVID-19: The Impact of the Pandemic on the Development of Countries and Regions” sponsored by the Russian Section of the European Regional Science Association and the Department of Socioeconomic Geography of Foreign Countries, Faculty of Geography, Moscow State University.

The conference focused on the multidimensional and multi-scale impact of the pandemic on the global and regional economies and social development.

In his report, Stepan Zemtsov elaborated on the impact of the crisis on SME and solutions which helped adapt to the realities of the modern world. Also, Stepan Zemtsov noted that in 2020 in most regions of Russia the SME sector shrank further owing to the introduction of online cash-registers and the VAT hike.

“According to our model, with a shrinkage of global markets by 3% and a decrease in households’ incomes and the volume of banking services by 5.5% and 5%, respectively, the number of micro and small companies may decline by 3.5-4%, which is close to the data of the RF Federal Tax Service as of August 2020 (about 4.3%). Owing to the reduction of small businesses’ activities, Russian GRP is expected to fall by 0.22%-0.67% (across different region) in 2020”, Stepan Zemtsov believes.

According to Stepan Zemtsov, the small business does not virtually take advantage of support measures, nor is much aware of them; only 2%-3% of enterprises used state support measures before the crisis. However, the expansion SME’s potential is feasible owing to digitalization and knowledge-intensive sectors: delivery, online services, internet banking and other.

The speaker noted that the most serious social implications caused by decline of SME were observed in the North Caucasus and Crimea where entrepreneurial ecosystems were underdeveloped and the level of digital inequality was rather high. As seen from the statistical data, over 50% of the employed are workers of small and mid-sized businesses or the self-employed.

Also, in his report Stepan Zemtsov outlined the prospects of further development of the sector, stressed the importance of state support of the SME and singled out both short-term and long-terms objectives to stabilize it.

Short-term objectives:

Promotion of the SME demand: subsidies to low-income people, families with children and the unemployed, as well as facilitation of access to public procurement;

Granting of soft lending to those affected, but still maintaining the employment;

Provision of tax benefits and deferrals to the hardest-hit sectors;

Provision of wage subsidies.

Long-term objectives:

Digitalization of public services, transformation of the business climate and compensation for digitalization;

Introduction of the ecosystem approach into the business policy;

Retraining of the unemployed: digital technologies and entrepreneurship training, as well as consulting;

Reduction of digital inequality: promotion of the ICT infrastructure, education of individuals and entrepreneurs.

Presentation to the report