COVID-19 and SME Failures

Categories : Customer and Users of Digital Payments, MSME's

Posted: October 19, 2020

Author: International Monetary Fund

This paper estimates 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. Done so by using a simple model of firm cost-minimization and measure each firm’s liquidity shortfall during and after COVID-19. The framework allows for a rich combination of sectoral and aggregate supply, productivity, and demand shocks. The authors estimate a large increase in the failure rate of SMEs under COVID-19 of nearly 9 percentage points, ab-sent government support. Accommodation & Food Services, Arts, Entertainment & Recreation, Education, and Other Services are among the most affected sectors.

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