Erbil — Measures taken to curb the spread of COVID-19 have led to reduced operating hours or the closure of many of Iraq’s small and medium-sized enterprises (SMEs). The economic impact of the pandemic is expected to be severe.

To measure the losses and investigate how SMEs are coping with movement restrictions, the International Organization for Migration (IOM), the Food and Agriculture Organization (FAO), and the International Trade Center (ITC) launched a panel study of 893 enterprises in 15 governorates across Iraq.

The first round of data collection took place from 22 June to 7 July 2020 and focused on 16 economic sectors. Results show that the pandemic has heavily impacted businesses’ ability to retain employees. There was an average reduction of 27 per cent in full-time employment from February, before lockdown measures were implemented, to June. The pandemic also resulted in an increase 30 percentage points in the employment gender gap; in February, the ratio of women to men with jobs was on average 1 to 13, which increased in June to 1 to 17.

The COVID-19 crisis has negatively impacted SME production levels in Iraq, with an average decline of 67 per cent across all sectors. All governorates were similarly impacted; no governorate saw a decline in production of less than 50 per cent. SMEs also faced a 65 per cent decrease in monthly revenue on average. Eighty-six per cent of SMEs surveyed temporarily shut down in order to cope with the economic hardship of COVID-19, and 63 per cent report they are at risk of shutting down permanently.

To cope with the economic impact of the pandemic, between February and June SMEs employed strategies such as: temporarily reducing employment, including not paying salaries to employees (34%), requesting leniency in paying financial responsibilities (25%), and sending employees home with a reduced salary (15%). SMEs report the most helpful form of government support to help cope with the impact of COVID-19 would be to reduce lockdown measures for some sectors (68%), provide rent subsidies (57%), and support self-employed individuals (45%).

The report provides further insight into the effect of border closures on SMEs, their ability to purchase inputs or sell outputs, and recommendations for public policies to help SMEs stay afloat. Wage subsidies and temporary tax suspensions would allow SMEs to retain employees and reduce job loss. Incentivizing technological solutions — for example by building the SMEs’ capacity for digital literacy — could transform the marketplace and allow firms to continue to with sales. Increasing work from home provisions can also keep workers safe by reducing their exposure to COVID-19. Tracking the impact of the pandemic on businesses can help identify urgent needs; responding with targeted, timely funding can help SMEs stay afloat.

Two more survey rounds with the same 893 businesses will take place in September and December 2020 to continue monitoring and analyzing the impact of COVID-19 crisis on production, labor, revenues and access to inputs, as well as the actions of SMEs in this context. This data will help illuminate the challenges faced by SME owners, and determine tools that can be developed to help them weather the COVID-19 crisis.

The study was funded by the U.S. Department of State’s Bureau of Population, Refugees, and Migration (PRM) and the European Union.

For more information please contact IOM Iraq’s Public Information Unit, Tel: +964 751 402 2811, Email:  iraqpublicinfo@iom.int