The COVID-19 outbreak has left many small and medium-sized businesses around the world struggling, but in the US and Germany, two economies with a large proportion of small and medium-sized businesses, the mood is particularly low.
New data show small business confidence in the United States fell to a seven-year low in April, while the mood among German SMEs is more subdued than during the 2008 financial crisis.
Experts told China Business News that global demand is weak, the supply chain on which they depend for their livelihood is disrupted, and more globalized small and medium-sized enterprises are more vulnerable to the crisis.
Hu Kun, associate researcher and deputy director of the European Institute of Economics at the Chinese Academy of Social Sciences, previously told China Business News that the extent to which a company is affected by the epidemic partly depends on whether it is deeply involved in the global value chain.
Lydia Boussour, a senior US economist at Oxford Economics, told China Business News: “Global chain disruptions may be an additional barrier for some small and medium-sized enterprises, but given that their revenues are more domestically oriented than those of larger firms, it is the sudden halt in US economic activity and the collapse in domestic demand that will hurt them the most. “The industries most at risk of permanent closure are small and medium sized businesses with weak balance sheets. These are sectors that rely more on face-to-face interaction, such as leisure hotels and
Confidence is in free fall
According to the KfW and Ifo economic research institute’s SME barometer index, the index of business sentiment among German SMEs fell 26 points in April, a stesteer drop than the 20.3 points recorded in March. The current reading of -45.4 is even weaker than the March 2009 reading of -37.3 during the financial crisis.
A sub-gauge of business conditions fell 30.6 points, the biggest monthly decline on record, after a 10.9 point drop in March. However, the index (-31.5) is still above its lowest point during the financial crisis. According to the report, this shows that SMEs were generally in a very healthy state when the COVID-19 crisis hit. However, the business expectations sub-indicator deteriorated rapidly to 57.6 points, indicating that SMEs were negative about the future, but the decline in April will have been less severe than in March.
Post time: Jul-09-2021