Page 12 - GEORptJun22

because of continuing government support.
Debora Revoltella, the EIB’s chief economist, told the webcast that swift government support had enabled a rapid rebound in the region’s economies and halved to 12% the proportion of companies facing a liquidity shortfall.
Alfred Kammer, director of the IMF’s European department, told the webcast that many companies had successfully re-orientated their businesses, with one in four increasing their online activity, and one in three adjusting their industrial processes or their services.
According to the report, companies that were integrated into global value chains, with high levels of productivity, innovation and digitalisation – as well as those run or owned by women – adapted faster to the pandemic.
Companies with access to credit lines or other financial facilities, and those that were part of larger corporate groups, were also less likely to go bankrupt. CEE and Eurasian companies continue to rely largely on bank credit for external finance. Capital markets are underdeveloped, and the availability of venture capital, private equity and leasing is very limited.
Access to finance continues to constrain firms’ growth in the region. The number of firms without access to credit or even a banking relationship is still relatively high. Revoltella told the webcast that finance for innovation was only available for large, established companies.
About 55% of firms perceive access to finance as an obstacle. Some 24% of small and medium-sized enterprises (SMEs) and 27% of young firms say access to loans or other finance is a problem. About 50% of firms rely solely on their own finances for projects, particularly small businesses and young firms. Innovative firms are also more likely to be credit-constrained, particularly young, innovative SMEs, says the report.
Improvements in collateral frameworks can improve the allocation of credit, reduce lending risks and increase access to credit. Financial literacy and improvements in audit and accounting standards, along with a genuine reform agenda geared to improving the quality of institutions, could increase firms’ ability and willingness to do business with banks, it argues.
Among the report’s positive findings, it found that CEE companies invest more in innovation than firms in similar economies in other regions, even if innovation is mainly driven by new technologies developed elsewhere. Investment in digital infrastructure and improvements in workers’ skills are driving innovation, reducing development gaps and building resilience in the region.
Innovation is particularly important for companies that contribute to global value chains (more than 50% of firms). Access to foreign technology and modern management also spurs innovation.
On the negative side, Eastern Europe and Central Asia are still lagging behind in green management practices, specifically in setting targets for energy use and emissions.
“The transition to a net zero carbon economy presents significant risks for the region, and firms are lagging behind developments in others parts of the world,” the EIB said.
12 GEORGIA Country Report June 2022 www.intellinews.com