Especially for industries and companies that can not replace direct contact with the customer, from catering, trade to tourism and transport, the effects of the pandemic have been and are very great.
These companies do not only lose revenue that normally covers fixed and variable costs. They often see, in the second year of travel restrictions around the world, the level of their liabilities fluctuating when compared to the expected revenue of the following years and their often impaired equity.
A recent IMF study shows that in such a situation, liquidity measures are not enough for companies that have suffered a reduction in their own funds as well as their prospects. The need to develop a support tool and the balance sheet of the affected companies and ideally of equity or accounts that are in practice equivalent to equity is proposed.
But designing such support tools faces many important challenges. In principle, it is not easy to design such a tool that will not distort competition and will only target those who are really affected. In addition, these tools require fiscal space, which does not exist uniformly in all countries.
Such an expansion is a tool that reduces the risks of distorting competition and supports companies that have viable business plans. In addition, the measure does not currently burden the budget and, by contributing to taxable growth and rescue, has a positive long-term impact on public revenues. Finally, it encourages long-term industrial investment, which often generates revenue several years after the start of investment projects, with the result that the depreciation of the first years does not have time to be offset by profits in the first five years.
Thus, this measure can also contribute to the strengthening of industry, which in the pandemic has proven how much it contributes to the resilience of our employment and economy.
