Impact of Small and Medium-sized Enterprises on Economic Grow

Nowadays, the small and medium-sized enterprises (SME) greatly contribute towards the social and economic wellbeing of the countries. The European Commission supports the small and medium-sized enterprises and their creation. SME are the Europe’s economic driving force and represent about 99 percent of all businesses in the European Union.

The European Commission is trying to create a business favorable and friendly environmental to SME. Also, promotes entrepreneurship, improves access to new markets and internationalization within the both of inside and outside of EU markets. Moreover, European Commission is encouraging the SMEs competitiveness and innovation through tax benefits, innovation loans and grants and promotes a better access to the funds and finance, because the role of small and medium-sized enterprises has significant impact on economic growth. The advantages of SME's to economy are obvious.

First of all, small and medium-sized enterprises contribute to the economy of creation of jobs at relatively low capital cost, especially in the fast growing service sector. Job creation is significant for developing and emerging countries that have high unemployment rates. SMEs are the main providers of employment in such countries. According the European Commission data, in the past five years, SME have created about 85 percent of new jobs and provided two-thirds of the total private sector employment in the European Union.

Second of all, SME contributes to the Gross Domestic Product (GDP) and have a huge impact on aggregate demand. SMEs contribute up to 40 percent of national income (GDP) in emerging economies. According European Commission data, GDP growth in the EU reflects growth in aggregate demand, for example, growth in exports increased compared to household consumption or government expenditure, and investment.

Moreover, SME contribute to the reduction income inequality and poverty, promote income generation and increase the country’s wealth. SMEs account for about 52 percent of private sector value added. It shows a huge contribution of private sector to the global economic. Additionally, SME promote development of a group of skilled and semi-skilled workers as a basis for the future industrial expansion.

To sum up, SME ensure economic growth, innovation, job creation and social integration in the EU.

Gintare Volskyte

[artigo de opinião produzido no âmbito da unidade curricular “Economia Portuguesa e Europeia” do 3º ano do curso de Economia (1º ciclo) da EEG/UMinho]