KPMG Türkiye Surveys Impact of Covid-19 on the Business World

KPMG Türkiye has released its research on how Covid-19 is affecting the business world. KPMG Türkiye's Strategy and Operations Advisory team conducted the Covid-19 Impact Survey between 1 and 6 April, with participation from approximately 250 people across all sectors. The survey examined the impact of the coronavirus outbreak, which began in China in December 2019, spread worldwide, and became a pandemic, on the business world and sectors. The survey conducted by KPMG Türkiye with business representatives reflects expectations for the post-pandemic period. Various views exist regarding the recovery period following the outbreak, ranging from 3 months to 12 months. Additionally, economic contraction is anticipated.

Serkan Ercin, Head of Strategy and Operations Advisory and Partner at KPMG Türkiye, commented on the report in a statement.

Ercin found that the pandemic and measures taken affect different sectors at varying degrees. Noting that there is interest in when the pandemic will be brought under control and when normal life will resume, Ercin emphasized that there are different predictions regarding the economic recovery that will follow. Ercin stated: "When we look at possible recovery scenarios for our country and the global economy following Covid-19, we see predictions ranging from 3 months to 12+ months and foreseeing significant economic contraction. On the other hand, we believe that these recoveries will also vary by sector and company, and that organizations that enter this period prepared, make correct decisions, and adapt to the new normal will emerge from this process in the best way possible."

To briefly summarize the findings from the research: 88% of survey participants believe that Covid-19 will have a high degree of impact on Turkey's economy, while 12% think it will have a medium-level impact.

More than 80% of company representatives surveyed expect more than 3% contraction in Turkey's economy in 2020. Those expecting more than 6% contraction stand at 30%. A 19% share expects growth rather than contraction. 35% of survey participants believe that at least 12 months will be needed for the impact of Covid-19 on Turkey's economy to disappear. The proportion of those saying at least 3-6 months is needed is 19%, while 21.9% forecast it will take 6-9 months. Sector representatives almost unanimously agree that Covid-19 has a significant impact on the sectors in which they operate. Half of survey participants, 50%, stated that their sector is highly affected, while 42% said it is moderately affected. 7% of participants believe that the outbreak has had no impact or minimal impact. From the survey, the impact appears to be relatively less felt in the energy, pharmaceutical, industrial manufacturing, and chemical sectors. While sector-based recovery expectations appear to parallel expectations for the national economy, recovery in industrial manufacturing, textiles, tourism/out-of-home consumption, energy, construction, and food and beverage sectors is expected to extend beyond 2020. The rate in the SME sector, which has been most affected by Covid-19, stands at 95%.

More than half of companies have shifted to remote working arrangements

58% of survey participants stated that they have switched to a work-from-home system to protect all employees from the outbreak. A 20% share reported that they have implemented remote working only for white-collar employees. Sectors such as education, law, financial services, banking, insurance, pension and life insurance, and energy are leading among sectors with remote workers.

Large companies proved to be more prepared for crisis

In terms of crisis preparedness and crisis management capabilities, it is possible to say that companies' revenue sizes are in line with their crisis management capabilities. Only 25% of SMEs have procedures and processes for crisis management, while companies with revenue above TRY 10 million show this rate reaching 75%. It is possible to say that the Covid-19 crisis has proven that every sector, particularly media, education, textiles, energy, chemicals, financial services, and construction, needs to advance in developing crisis management capabilities.

Sales and finance difficulties

The issues companies face most due to Covid-19 are as follows: difficulties in accessing finance (25%), decrease in domestic sales (24%), increase in production costs (22%), and liquidity constraints (18%). Companies are likely to face revenue declines of up to 40% in 2020 and will make significant target revisions in their 2020 budgets. 53% of company representatives expect revenue declines of 2-20% in 2020, while 36% anticipate declines of more than 20%. A 10% share does not expect revenue decline, while the proportion expecting revenue growth is only 1%. Tourism/out-of-home consumption, retail/retail trade, and private equity sectors are likely to experience revenue declines of up to 40% in 2020 due to Covid-19.

Participants evaluated support packages

43% of research participants find the tax and social security contribution payment deferral support included in the government-announced packages to be highly usable and beneficial. 41% believe that minimum wage support and short-time working allowance are highly usable and beneficial. 27% of survey participants find loan principal and interest payment deferral support to be usable and beneficial. For access to finance and credit restructuring, the rate was 21%. The report shows that relatively small and medium-sized companies find the tax, social security contribution deferral, and minimum wage support, short-time working allowance support provided under the Economic Stability Shield package to be beneficial. In addition to the support provided in the Economic Stability Shield package, there is a desire to expand the scope and improve conditions. Improving available credit facilities, long-term tax deferrals and debt forgiveness, expanding covered sectors, sector-specific development packages, and expanded employment support measures to reduce companies' employee costs are among the main requests and demands of participants.