{
  "title": "COVID-19 and SME Failures",
  "publication": "IMF Working Papers, September 25, 2020",
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  "summary": "We estimate the impact of the COVID-19 crisis on business failures among small and medium size enterprises (SMEs) in seventeen countries using a large representative firm-level database.",
  "authors": [
    "Sebnem Kalemli-Ozcan",
    "Pierre-Olivier Gourinchas",
    "Veronika Penciakova",
    "Nick Sander"
  ],
  "publishDate": "2020-09-25",
  "series": "IMF Working Papers",
  "sections": [
    {
      "heading": "Overview and methodology",
      "content": "- Study objective: estimate the impact of the COVID-19 crisis on business failures among small and medium size enterprises (SMEs) in seventeen countries.\n- Data and approach:\n  - Uses a large representative firm-level database.\n  - Employs a simple model of firm cost-minimization to measure each firm’s liquidity shortfall during and after COVID-19.\n  - Framework allows for a rich combination of sectoral and aggregate supply, productivity, and demand shocks."
    },
    {
      "heading": "Key findings on SME failures and sectoral impacts",
      "content": "- Increase in SME failure rate under COVID-19:\n  - Estimated increase of nearly 9 percentage points, absent government support.\n- Most affected sectors:\n  - Accommodation & Food Services\n  - Arts, Entertainment & Recreation\n  - Education\n  - Other Services"
    },
    {
      "heading": "Employment consequences",
      "content": "- Jobs at risk due to COVID-19 related SME business failures:\n  - Represent 3.1 percent of private sector employment."
    },
    {
      "heading": "Financial sector effects",
      "content": "- Non Performing Loans (NPLs):\n  - Share of Non Performing Loans on bank balance sheets would increase by up to 11 percentage points.\n  - This increase represents 0.3 percent of banks’ assets.\n- Bank capital impact:\n  - Resulting decline in the common equity Tier-1 capital ratio of 0.75 percentage point.\n- Overall characterization: despite large SME and employment impacts, effects on the financial sector are estimated to be moderate."
    },
    {
      "heading": "Policy evaluation: cost and effectiveness",
      "content": "- Targeted intervention:\n  - Fiscal cost of an intervention that narrowly targets at risk firms can be modest: 0.54% of GDP.\n- Non-targeted subsidies:\n  - At a similar level of effectiveness, non-targeted subsidies can be substantially more expensive: 1.82% of GDP."
    },
    {
      "heading": "Implications",
      "content": "- Results have important implications for:\n  - The severity of the COVID-19 recession.\n  - The design of policies to support SMEs.\n  - The speed of the recovery.\n\nSource: \"COVID-19 and SME Failures\", Sebnem Kalemli-Ozcan, Pierre-Olivier Gourinchas, Veronika Penciakova, Nick Sander, September 25, 2020.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2020/09/25/covid-19-and-sme-failures-49753"
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    "Authors: Sebnem Kalemli-Ozcan, Pierre-Olivier Gourinchas, Veronika Penciakova, Nick Sander",
    "Published: September 25, 2020",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513557748.001",
    "Study objective: estimate the impact of the COVID-19 crisis on business failures among small and medium size enterprises (SMEs) in seventeen countries.",
    "Data and approach:",
    "Increase in SME failure rate under COVID-19:",
    "Most affected sectors:",
    "Jobs at risk due to COVID-19 related SME business failures:",
    "Non Performing Loans (NPLs):",
    "Bank capital impact:",
    "Overall characterization: despite large SME and employment impacts, effects on the financial sector are estimated to be moderate.",
    "Targeted intervention:",
    "Non-targeted subsidies:",
    "Results have important implications for:",
    "**Working Paper**"
  ],
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