SCI Assesses Aftermath of Coronavirus on Businesses

EghtesadOnline: Thirty-eight percent of businesses came to a complete standstill due to the outbreak of the new coronavirus in the two months leading to April 19, which declined to 21% in the month ending May 20.

News ID: ۷۵۰۳۵۶

01 July 2020

Based on a nationwide survey conducted by the Statistical Research and Training Center affiliated with the Statistical Center of Iran on nearly 4,000 respondents, a total of 22% of Iranian businesses continued their full operations seamlessly during the first two months of the pandemic; the figure improved by 12% to reach 34% in the month ending May 20.

Forty percent of the businesses operated at a fraction of their capacity in the two months ending April 19, which increased to 45% in the month ending May 20.

A survey of their economic activities showed the coronavirus mostly hit their sales level. Cash flow, labor force, production and savings were other aspects of economic activities impacted by the spread of coronavirus in the descending order. The ranking was the same in both periods of time under review.

Thirty percent of all businesses made at least one employee redundant during the two months to April 19, which reduced to 7% in the month to May 20.

At least one employee worked remotely in 25% of all businesses over the two months ending April 19 compared with 20% in the month ending May 20.

At least one employee temporarily abstained from work in 15.8% of all businesses during the two months to April 19 and 3.9% during the month to May 20.

Only 8% of all businesses hired a new employee during the two months to April 19 compared with 11.3% in the month ending May 20.

At least an extra work hour was reported by 7.9% of businesses during the two months to April 19 compared with 8.7% in the month ending May 20.

Of all businesses, 24.5% reported a price increase [in goods or services], 22% a price decrease and 53.5% reported no change during the two months. The percentages stood at 28% (price increase), 20.2% (price decrease) and 51.9% (no change) in the month leading to May 20.

The main reason behind price changes were fluctuations in the prices of raw materials (31.3%) during the two months to April 19 and changes in the level of demand (23.3%) in the month ending May 20.

Over the two months under review, 70% of all businesses reported a decline in sales, 16.1% rise in sales and 13.1% reported no change. These percentages stood, respectively, at 66.8%, 16.7% and 16.6% in the month ending May 20.

Sixty-three percent of businesses reported a decrease in production, 15.38% increase and 21.2% reported no change in the level of production during two months to April 19. These percentages stood, respectively, at 57.2%, 16.5% and 26.3% in the month ending May 20.

The most-cited challenges facing businesses during the two months to April 19 were payment of wages (25%), repayment of loans (21%) and payment of rents (21%). Over the month to May 20, payment of wages with 29%, repayment of loans with 21% and payment of rents with 14% were the main problems facing businesses.

According to the respondents, the main solution to the economic crisis created by the coronavirus is getting credit from banks (44%), taking out loans from micro financial institutions or real entities (20%) and reducing operational expenses (13%).

Asked how they were responding to the decline in demand due to coronavirus restrictions, participants in the survey referred to online sales (22.4% in two months to April 19 and over 25.2% in the month leading to May 20), sale on credit (18.1% in the two months to April 19 and over 22.6% in the month to May 20) and offering special discounts (16.7% in two months to April 19 and over 16.2% in the month ending May 20).

Of all the respondents, 65.5% didn’t feel optimistic about their business prospects, 16.3% believed things would change for the better and 18.2% said the situation would remain unchanged.

If the current situation persists, 62.8% of respondents said production would decrease, 23.7% said it would increase and 13.5% said it would remain unchanged in the next three months.

Call for Gov't Support

A total of 23.9% of respondents expected the government to lend support to businesses by offering low-interest loans, 20.8% expected to see the temporary suspension of loan repayments until the end of the pandemic and 15.1% expected the government to offer tax break during the pandemic.

The Iranian government has approved a 750-trillion-rial ($3.75 billion) package to help low-income households and struggling businesses impacted by the coronavirus. The loans will be given to small- and medium-sized enterprises hit hard by the pandemic, according to the website of the Central Bank of Iran.

The lending rate will be 12% to be repaid within two years, Abdolnasser Hemmati, the CBI governor, said.

Commenting on the interest rate, Hemmati said it is reasonable, given the high inflation rate in the country.

“Even if banks set 18% interest on loans, the real interest rate would still be negative when compared to the annual inflation rate. Any rate below 12% would apparently impose further financial strain on banks,” he added.

Hemmati said only businesses that did not lay off workers during the corona crisis would be eligible for the loans. He instructed banks to process the loans soon and cut red tape.

Hoshyar Faqihi, an official with the chamber, told ISNA recently that more than 40,000 businesses affiliated to Iran Chamber of Guilds have been referred to banks to receive the government-backed coronavirus bailout loans.

Noting that guilds were expecting to receive a grant as well loans but under the current conditions, the government cannot offer more financial help, the official said individuals with self-employed insurance policies and those without the insurance of Social Security Organization won’t qualify for these low-interest loans.

Guilds Suffer $1.3b Losses per Month

Early June, Faqihi said coronavirus lockdowns inflicted monthly losses worth 260,000 billion rials ($1.3 billion) on local businesses under the supervision of ICG.

“The chamber has identified and introduced 57 groups of businesses to the government to receive coronavirus bailout, of which 25, including coffee shops, reception halls, beauty salons, clothing units and bag and shoe shops, have been found eligible to receive loans at the interest rate of 12%,” he said.

The monthly losses incurred by these 25 groups are estimated to stand at 143,000 billion rials ($715 million) and those of the remaining 32 groups at 122,000 billion rials ($610 million). The latter did not qualify for government loans.

Faqihi said 2.3 million people are working in sectors that were not found eligible for the bailout and 2.8 million people are working in guilds that will receive the government aid.