# **1. Introduction**

The economic impact of the COVID-19 pandemic has been severe and persistent. In 2020, the global economy is expected to experience its worst recession since the great depression of the 1930s, with the highest share of countries experiencing contractions in per capita GDP since 1870 (WBG, 2020).<sup>1</sup> Estimates by Apedo-Amah et al. (2020) show that firm sales declined by more than 70% around the peak of the crisis (as measured by the steepest drop in Google Mobility), and have remained more than 40% below last year’s levels even several months later. Two-thirds of firms have either fired employees, reduced worker hours or wages, or asked workers to take leave. More than half of micro and small businesses (those with fewer than 20 employees) are in arrears or expect to fall into arrears in the next six months. And while there is welcome news of vaccines and new treatments for COVID-19, these are unlikely to be available everywhere at once meaning that the economic pain is likely to persist for some time.

In response to the crisis, governments around the world have relied on a wide range of policy measures to support firms and households. While these responses have been uneven across countries, they are unprecedented in their magnitude. Fiscal stimulus in high-income economies has reached 10% of GDP or more, with around 40% going to firm support. In developing countries, faced with more limited fiscal space, governments have allocated between 1% and 3% of GDP to this purpose, with about a quarter of this amount dedicated to supporting businesses. Irrespective of the amount of the resources invested, data on whether these are reaching the intended beneficiaries, addressing their needs, and helping firms adjust to COVID-19 are desperately needed to inform policy-making. This paper provides the first such assessment on a global scale.

Specifically, the paper utilizes a unique data set covering more than 120,000 firms across 60 countries during the months of April-September 2020 to present a set of novel stylized facts on the policies implemented to support businesses from a firm-level perspective. It characterizes the beneficiaries of implemented policies, contrasts the policies implemented with ones that firms state are most important to them, identifies reasons for not accessing policy support, and links policies with firm performance, layoffs, expectations, and uncertainty. The paper also provides some initial indicative evidence about the targeting and effectiveness of policies.

Our main findings are grouped into four sets of stylized facts. First, we show that policy support has been especially limited for the most vulnerable firms and countries: micro firms are about half as likely to access support as large firms, and firms in high-income countries are about five times more likely to receive public support than firms in low-incomes countries. Second, we identify some mismatches between policies reported as most needed by firms and policies that firms are more likely to receive, particularly in upper-middle-income and high-income countries. Third, we document that targeting of initial policy responses was limited as well as some _mistargeting_ , likely as a result of barriers to access support and lack of targeting capacity, with firms that did not experience shock or sales drop benefiting from support and firms experiencing large negative shocks not having access to public support. Fourth, we find indicative evidence of effectiveness: our results show that policies such as credit and cash transfers appear to be helping firms address liquidity constraints, while receiving wage subsidies seems to be associated with lower probability of firing workers.

> 1The World Bank forecasts that the global economy will contract by 5.2 percent in 2020 (WBG, 2020).

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