Economic impact of corona crisis discussed in a podcast by sic! project

Few expected the pandemic to last this long and many businesses that couldn’t promptly reinvent themselves had to close down. By last June, 45,000 Moldovans lost their jobs, and with the total working hours counted, the loss amounts to an equivalent of 100,000 full-time jobs. These are some of the takeaways from the first episode of a new podcast launched by the sic! project, featuring Doina Ursachi of the Summit Events and economic expert Marcel Spatari as its guests.

The moderators, Andrei Lutenco and Eugen Muravschi, learned from their interviewees that the assistance provided by the government was insufficient, slow to arrive and, paradoxically, poorly absorbed by the business community. In their opinion, the government could have offered alternative measures, for the same money, to aid companies and employees more effectively. With the pandemic still around, Moldova should look at EU’s solutions for relaunching the economy.

Doina Ursachi shared the experience of Summit Events, a company specializing in event planning and catering. When the first lockdown was imposed, her firm had to cancel all the events and hope for the restrictions to be short-lasting. The company used the break to hold online training for its personnel, but that couldn’t last long. “The most difficult moment was when we ran out of savings (...) I can tell you that everything we saved only lasted for two months.” Doina Ursachi and her colleagues couldn’t profit from the lifesaver that was the reopening of outdoor dining areas last summer. So one of the solutions was to develop an online home catering service. The firm also started to offer technical assistance for online events.

Marcel Spatari, author of the study “Who pays the pandemic’s bill?”, recalled that the Moldovan government didn’t want to cover temporary layoffs, as was the practice in Europe, deciding instead to only reimburse the taxes on layoff pays. But even this half-measure came quite late, when many companies already let their employees go or offered them leaves that weren’t eligible for tax reimbursement. Another measure was to cover loan interests. The problem was that the measure was quite undemanded, as companies are naturally reluctant to borrow when financial flows are unstable. As for the VAT refund, the third major assistance device offered by the government, it was conditioned on tax inspections, which acted as a deterrent.

Marcel Spatari believes the government should have funded temporary layoffs to help companies keep their employees. The amount allocated by the government for the indirect measures would have been enough to cover temporary layoffs at a rate of 50% of the average salary for 100,000 employees. Instead of helping companies and employees directly, with cash, the government went for indirect measures. As a result, of the 410 million lei originally allocated for the aid package, only a fourth was eventually absorbed.

Marcel Spatari however says that it’s early to tell if the measures were entirely wrong. Maybe the Moldovan economy, small and therefore more dynamic, will be able to rebound fast enough even without measures of the kind enacted in the west. But the pandemic is still ongoing, and the economist believes the government should look for inspiration at the European Union. The EU as an institution, as well as the governments of member-countries, are willing to borrow to relaunch the European economy and wait until economic growth bears fruit. Moldova, too, could come up with a strategic plan to enhance infrastructure. This would make our economy more attractive for investment, create jobs, stimulate consumption and, overall, create conditions for a post-pandemic economic rebound.

The full episode can be listened to here. The project is funded by Soros Moldova Foundation’s “Phase II COVID-19 response” reserve fund that aims to assist Moldova in combating the spread of coronavirus in Moldova.

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