Armenia Evidence from UNECE’S Survey of Micro, Small and Medium Enterprises NOTE

The Impact of COVID-19 on trade and structural transformation in Armenia Evidence from UNECE’s survey of Micro, Small and Medium Enterprises NOTE

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I PREFACE

As the new coronavirus disease (COVID-19) continues to spread, its disruptive impact is becoming more pronounced, posing unprecedent challenges for all countries. Governments have seen their priorities shift overnight towards upscaling public health preparedness and emergency support measures to cater for the vulnerable segments of their population. The challenges facing Governments are further complicated by supply-chain disruptions that have left enterprises struggling to survive. Pay cuts and furloughs have been an increasing trend, so that losses in lives are compounded by a livelihood crisis.

If anything, countries across the globe are suffering setbacks that are akin to complex humanitarian emergencies associated with disasters. The coping strategies of businesses and State agencies are being depleted by the unfolding economic crisis, so that vulnerabilities are aggravated and the impact on productive capacities, institutional dexterity and business confidence is severe. It stands to reason, therefore, to avoid treating the pandemic as a temporary shock whose effects can be swiftly reversed once normality is attained.

The implication is that any attempt to assess the impact of COVID-19 must proceed from a clear understanding of the development challenges that occupied Governments’ agendas at the eve of the pandemic and ground the analysis in the context of economic vulnerability. For if there is one lesson to draw from development experiences, it would be that disasters aggravate deep-seated structural weakness. Without an understanding of these weaknesses, relief and development efforts might miss the target.

It is from this perspective that the impact of the pandemic on Armenia’s trade and structural transformation was assessed. Consistent with the United Nations Economic Commission for Europe’s (UNECE) trade mandate1, the assessment traces the way non-tariff measures (NTMs) governing trade in goods influenced end-to-end supply chains and captures the lingering ripple effects into the economy.

The assessment is based on a survey of micro, small and medium enterprises (MSMEs) belonging to the agricultural, manufacturing and trade sectors, drawing on the experience gained from UNECE study on regulatory and procedural barriers to trade in Armenia.2 The focus on MSMEs is consistent with their important role in driving the Arminian economy. According to the latest official statistics, MSMEs accounted for 99 per cent of active enterprises in 2017, with micro enterprises representing the largest segment (94 per cent of total MSMEs). Moreover, MSMEs accounted for 66 per cent of total employment, 62 per cent of total turnover and 60 per cent of total value- added generated by the enterprise sector during the said year.3

1https://www.unece.org/fileadmin/DAM/trade/documents/ToR_SCTCS_Ap- 3https://www.armstat.am/file/article/eng_print_version+.pdf pendix5.pdf 2UNECE (2019) Regulatory and procedural barriers to trade in Armenia: Needs assessment (http://www.unece.org/fileadmin/DAM/trade/Publica- tions/ECE-TRADE-452E.pdf)

II Such a focus is also dictated by the MSMEs’ limited resources, which renders them inherently vulnerable to negative shocks and change