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People in the line keeping distances and wearing masks after the polish government announced new measures to limit the spread of the Covid-19 pandemic. Walbrzych on March 27, 2020.
Les gens dans une file d attente gardent leurs distances et portent des masques apres que le gouvernement polonais ait annonce de nouvelles mesures pour limiter la propagation de la pandemie de Covid-19. Walbrzych le 27 mars 2020.NO USE FRANCE
Future Development

Same shock, different impacts: The impact of COVID-19 on firms in Central Europe

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Editor's Note:

Editor’s note: This is the first blog in a series using a survey of firms to assess COVID-19’s impact on sales, firm responses, public policy efforts, and future outlooks with a focus on uncertainty and financial risks.

 Slam in sales, but signs of recovery

What was COVID-19’s damage in Bulgaria, Poland, and Romania? The first six months of the pandemic claimed a quarter of total sales on average (Figure 1). Firms reported a major drop in sales during the first wave averaging between 21 percent in Poland to 31 percent in Bulgaria. Some of the losses were recovered by the end of 2020 and early 2021 (Figure 1), but will this nascent rebound be sustained and how long will it take to bounce back to pre-pandemic levels? Upcoming survey waves will provide insights on this but there are reasons to be cautious about the recovery given that the second wave indicates firms were reverting to their pre-pandemic trajectories.

Cumulative change in sales over the last 6 months vs. changes in sales over the last 30 days before the interview

Who suffered most? Looking at countries and sectors, we find (Figure 2) firms that experienced the highest drop in sales in the first phase of the pandemic were also the ones that recovered most as the crisis unfolded, once the short-term shock and initial lockdowns receded (Figure 2). This pattern is consistent across the three countries. However, comparing across countries, we find that Polish firms recovered faster than ones in Bulgaria and Romania for every level of initial sales drop (Figure 2 the navy blue line representing the results of Polish firms lies above the lines of Romania and Bulgaria). This inverse relationship between recovery and sales losses is preserved when comparing firms by sector (Figure 3). The lockdown clearly affected businesses in different sectors heterogeneously, with those in the hospitality sector being especially affected versus professional services that could continue with work being done from home. The service sector stands out as being both the most affected but also the sector experiencing the highest rebound during the second wave (almost 13 percentage points vs. 7 percentage points for retail and manufacturing).

Change in sales between first and second wave by impact on sales in the first wave

Watch the small and young firms

Going beyond aggregate analysis, at a country and sectoral level, we find that there are some firms that were especially affected. We find that firms of all sizes suffered significant losses in sales, but the magnitude of the shock changes linearly with size: The drop for micro-firms (0-4 employees) was twice as large as the drop for the largest firms (100+ employees) . Similarly, we find significant differences correlated with the age of firms. The youngest firms underwent the biggest drop in sales (40 percent) while established firms (10 years or older) shared a similar drop in sales, around 26 percent. We also find that these two dimensions are correlated but independent in explaining firms’ exposure to the COVID-19 shock, i.e., the smallest and youngest firms were the most critically affected by the pandemic.

Impact on sales by firm sector

Leonardo Iacovone

Lead Economist, Finance, Competitiveness and Innovation Global Practice in the Europe and Central Asia region - World Bank

Adjunct Professor - Hertie School


Natasha Kapil

Senior Private Sector Specialist, Finance, Competitiveness and Innovation Global Practice in the Europe and Central Asia region - World Bank

Lukasz Marek Marc

Economist, Finance, Competitiveness and Innovation Global Practice in the Europe and Central Asia region - World Bank

Ilias Skamnelos

Practice Manager, Finance, Competitiveness and Innovation Global Practice in the Europe and Central Asia region - World Bank

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