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How Covid-19 Pandemic Has Affected Small Businesses Lifecycle?

Fatima Chughtai, Sat, Sep 25,2021 | 3 min read

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Affect of Covid 19 on Businesses

Businesses around the world are still shaky from COVID-19’s impact. The pandemic of coronavirus disease has severely affected the global and Pakistani economy. 

Major victims of the COVID-19 outbreak are Micro, Small, and Medium-Sized Enterprises (MSMEs).  While the hope is mounting for a swift recovery with the rollout of vaccines globally, conquest is still in the hands of the future. With the battle still on with the third wave, specialists are alarming us about the risks of re-opening too early and setting off a considerably deadlier fourth wave. Many organizations are trying ways out and restructuring their business models to align with the new normal: contact-free commercialization.

The small enterprises are facing several issues such as financial, supply chain disruption, decrease in demand, reduction in sales and profit, among others. According to researchers, most of the enterprises were neither prepared nor have any plan to handle such a situation. Furthermore it was also reported that two-thirds of the enterprises could not survive if the lockdown lasts more than two months. Based on the results of the research, different policy recommendations were proposed to ease the adverse effects of the outbreak on small and medium enterprises. 

According to the United Nations Pakistan’s ‘COVID-19 Socio-economic Impact Assessment and Response’ report, the pandemic caused a deep contraction of the manufacturing sector in the first quarter of 2020. All three key sectors, i.e. agriculture, industry and services, experienced economic losses during the first quarter of 2020. 

The pandemic has impacted the sectors unequally, however; the services sector has been hit the hardest, followed by the manufacturing and the agriculture sector. Within the services sector, entertainment, hospitality, tourism and logistics have all suffered significant losses in revenue. 

Construction activities reduced noticeably in the first quarter of 2020, while the reduction in tourism adversely impacted accommodation and food service activities, especially in the northern regions of Pakistan. 

Small- and medium-sized garments manufacturing firms witnessed a reduction in export orders or shut down completely, resulting in a loss of revenue and employment.

 Similarly, the surgical industry is 100 per cent dependent on exports – the havoc the pandemic has created in Pakistan’s most relevant export markets means buyers were closed down and shipments either delayed or halted altogether. The sector is also dependent on imported steel; the lockdown and general slowdown has disrupted the supply of inputs. 

Moreover, firms reported that excessive costs have been incurred due to demurrage as shipments could not be cleared. Finally, the auto parts industry experienced an extremely high demand shock as the economic slowdown has substantially reduced the sales of both new and used vehicles. The two auto giants in Pakistan, Honda and Toyota, recorded historic lows in sales and their production has come to an absolute standstill for months. 

This has had a trickle-down effect on auto parts manufacturers. The lockdown has also reduced vehicle usage, and hence decreasing demand for repair and for auto parts. There were hardly any accidents reported in Lahore during the lockdown period, for example. The major wholesale markets such as ‘Badami Bagh’ and others were also closed, resulting in a collapse of sales and pushing millions out of employment. 

This blog article gathers information about a situation that is rapidly evolving. As the circumstances and impacts of the COVID-19 pandemic are continuously changing every day, the analysis of the information presented here may also have to be adjusted in terms of relevance, accuracy and completeness.


Asian development outlook: What drives innovation in Asia? Special topic: The impact of the coronavirus outbreak—an update Asian Development Bank, Manila, Philippines (2020)
3- United Nation 2020: “Pakistan’s COVID-19 Socio-Economic Impact Assessment and Response report” 
4- Questionnaire on the Resilience of Micro, Small and Medium Enterprises under COVID-19

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