Proposals for support measures for the Moldovan business environment in the context of COVID-19

About two months have passed since a new virus was confirmed in China – COVID-19. In a short time, this virus has spread in most states around the world, infecting about 182 thousand people and causing about 7 thousand deaths (report on March 17, 2020). Even though the danger seemed far away, Europe was also affected by COVID-19. The most affected countries are Italy (28 thousand cases), Spain (10 thousand cases), Germany and France (7 thousand cases), but also Romania (158 cases), Russia (90 infected) and the Republic of Moldova (29 cases).

Source: Center for Systems Science and Engineering Johns Hopkins University; 
March, 17th, 2020.

The global epidemic brings considerable economic losses, including the case of Moldova’s economy. In this period of severe uncertainty, the authorities must take a set of measures that will come both in defending the health of citizens, but also directly, in providing support for the business environment in the country, which is the driving force of the economy.

The impact caused by the spread of COVID-19 in the Republic of Moldova implies long-term painful effects for small and medium-sized enterprises. There is an increased risk of bankruptcy for many SMEs, which are already experiencing significant losses. The most affected industries are tourism, HoReCa, retailers, as well as those providing leisure services.

We are going through difficult times for the whole society. This epidemic will bring with it a gloomy and pessimistic scenario for the economic course of both the world economy and the Moldovan economy. We note that COVID-19 has affected most of the world powers, and the economic effects will soon be visible. 

The economic activity of many companies is stopped, a massive reduction in profit will be observed and, implicitly, losses will decrease the incomes of citizens as a result of forced of technical unemployment. In this complicated stage, it is the state that has to manage the crisis and offer unconditional support to the citizens (which are taxpayers). We have already seen how Germany has offered €550 billion in tax exemptions for companies and loans; China has distributed $79 billion to SMEs, Japan 4.1 billion or Denmark, which for three months will cover 75% of wage costs only so that employees do not get into unemployment. 

But what is happening in the Republic of Moldova? Does the state have the capacity to support the business environment? Unfortunately, when analyzing the state budget, it is observed that there is not much room for maneuver in the current context. It doesn't matter how much we wish we had measures such as in Germany, China or Japan, we will not be able to. 

This is because in the Republic of Moldova there is a high level of underground economy (~ 40% of GDP), and the authorities are doing nothing to stop this phenomenon; because politicians put obstacles to the economic agents, instead of encouraging them; because billions are stolen without anyone answering for it; because we have a justice system that defends the interests of only certain groups; because the unreported employment is practiced massively (about ¼ of the population); because public investments are not made rationally; because ... the list can continue ...

said Alexei Repede, president of Worldwide Moldovan Business Association

Worldwide Moldovan Business Association is concerned about the difficult economic situation which is going to be in Moldova. Thus, we propose the following measures to support entrepreneurs in the country:

  • Extension of the payment period for income tax and VAT;
  • Stopping payments of rates and interest for investment loans and for any other loans with a repayment schedule, for a minimum period of 90 days and rescheduling these debts for a minimum period of 6 months, without applying any additional costs or penalties;
  • Establishment of non-reimbursable or interest-free financing lines for the payment of employees and suppliers to small and medium-sized enterprises directly affected;
  • Allocation of financial resources from the state budget to finance the losses registered by the companies, as a result of the quarantine period;
  • Granting government guarantees to companies to contract bank financing to support current activity;
  • Period of grace or rescheduling of payments for communal services, without the provision of services being interrupted;
  • Extension of the deadline for filing fiscal and statistical declarations, without applying sanctions.

The epidemic with COVID-19 is a story with an unclear end and still impossible to predict. What is certain is that human losses are already tragic and that decision makers must act immediately to protect their citizens from the challenges and risks they face and mitigate the consequences in every possible way.

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