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Taking the pulse of business: COVID recovery and policy implications

Grâce à un prêt d'une banque locale, cette nouvelle entreprise de biscuits a pu démarrer en Bosnie-Herzégovine. Photo : Almin Zrno/Banque mondiale With a loan from a local bank, this new biscuit company got off the ground in Bosnia and Herzegovina. Photo: Almin Zrno/World Bank

As the global economy gradually finds its way out of the COVID-19 pandemic, we are reminded each day of the fragility of recovery  – threatened by new variants, outbreaks, and case spikes. It’s also a recovery that is uneven and unequal. Many low- and middle-income countries continue to face high levels of transmission as well as bottlenecks to vaccination, which contribute to business activity remaining below pre-pandemic levels.

Businesses, and particularly SMEs, continue to bear the brunt of the economic shock. To better inform policymaking in support of a productivity-driven private sector recovery, the World Bank has taken the “pulse” of firms across 76 countries about the impact of COVID 19 on their performance  (Business Pulse Surveys (BPS) and Enterprise Surveys (WBES)) since the onset of the pandemic. With data on over 100,000 firms now available, we have a better understanding of how firms around the globe have coped with the pandemic and what needs to be done to forge a sustainable path forward.

A U-shaped recovery in business activity: A first encouraging sign in the data is that business activity is recovering. Three out of four firms that closed temporarily during the early months of the pandemic are now operating again. Although firm sales are still 28% below pre-pandemic levels, it is a significant improvement from a 41% decline in the months immediately following the onset of the crisis – suggesting a U-shaped recovery pattern. Despite disruptions in global production networks, exporters are recovering faster than other firms, although their sales are also below pre-pandemic levels.

More firms are going digitalMore businesses, and exporters and importers in particular, have embraced digital technologies and are leveraging them to adapt to the crisis.  The share of firms increasing the use of digital technologies rose from 31% in the early months of the pandemic to 44% some 7-12 months into the crisis, while the share of businesses making new investments in digital solutions grew from 17% to 29%. Encouragingly, women-led micro firms have been significantly more likely to increase the use of digital platforms than their male-led counterparts.

Jobs are coming back, albeit slowly: Our surveys show that while fewer firms are cutting down labor, the pace of recovery in employment remains slow compared to the initial decline. The share of firms reducing hours or wages decreased from 44% early in the crisis to 32% later in the pandemic. Although this is an improvement, the number of jobs coming back is still well below the job losses experienced earlier in the pandemic.

Despite the uptick in business activity, digital adoption, and some recovery in employment, continued uncertainty and financial vulnerabilities remain the biggest threats to a sustainable and more equitable recovery . In fact, businesses responded that their sense of uncertainty remains just as high more than a year into the pandemic. Similarly, financial vulnerabilities continue to loom large: while 37% of firms recovered from the danger of falling into arrears since the early months of the pandemic, a new group of firms – 30% of the total – are now either in arrears or likely to fall in to arrears.

High levels of uncertainty also affect how willing businesses are to invest in digital technologies, and their willingness to hire.  Our surveys show that the recovery in sales has not necessarily gone hand-in-hand with more hiring. There is also a clear indication from the survey data that the sluggish recovery in employment is not explained by increased automation or digital adoption levels – but rather, a still heightened sense of uncertainty among businesses. This suggests that, without public policy action, not all jobs lost during the pandemic may come back, even as sales trend back to their pre-crisis levels. 

Historically high uncertainty requires policymakers to inject not only capital but, more importantly, confidence into the business sector. To do so, governments should first ensure clear, timely communication of the eligibility, duration, and objectives of public assistance programs  – so that firms are reassured with consistent policy messages and outcomes. This also means that we must continue to collect and analyze data on the impact of the crisis on businesses and policy responses amidst an ongoing pandemic to better understand what is needed, and monitor the effectiveness of the assistance program.

Second, protecting the financial sector’s ability to continue lending is crucial, especially in countries with less developed financial markets.  As our survey results suggest, large firms are recovering faster than small and micro businesses. Furthermore, financial vulnerabilities are greater for businesses led by women compared to those led by men. Thus, helping banks and other financial and non-financial institutions extend financing to viable, productive small and medium-sized enterprises could help bridge the financing and gender gaps.  Asides from financing, women-owned businesses face a range of constraints from laws and regulations to policies that bias against them. It is a timely opportunity to correct and address these biases so that women-owned businesses can be an integral part of recovery.

Third, governments have an opportunity to accelerate digital transition through programs that facilitate and incentivize technology adoption.  Digital technology has proven to be an effective means of mitigating the impact of the crisis on firm performance, particularly so for women-led firms. Nonetheless, many businesses – and small firms in particular – invest relatively little in digital technologies and product innovation. Policies to facilitate technology adoption will help firms weather the effects of the current crisis as well as help set the foundations for faster productivity growth in the future.

These findings, and more, are discussed in greater detail in a recent World Bank working paper. With the Business Pulse Survey Dashboard now covering 30 indicators ranging from firms’ sales to business expectations, we are committed to helping policymakers around the globe better assess firm-level risks and design public support programs. While the pandemic is not over yet, we hope that our continuous effort to collect timely, policy-relevant data will help establish the foundations for a sustainable, resilient, and inclusive recovery  and improve policymakers’ arsenal of tools for addressing future shocks.


Mari Elka Pangestu

Former World Bank Managing Director of Development Policy and Partnerships

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