Global corporate insolvencies to increase 26% in 2020; Turkey, US, HK to be worst hit
Global corporate insolvencies are likely to increase by 26% in 2020 as the Coronavirus pandemic pushes the world economy into recession, says the latest insolvency report by Atradius, a provider of trade credit insurance, surety and collections services.
The forecast is based on the assumption of a gradual phasing out of the fiscal stimulus measures and a reopening of bankruptcy courts and proceedings.
The report says that all major regions will be confronted with an increase in insolvencies. “Across countries there is a wide range of insolvency projections, depending on the severity of the economic contraction and the insolvency elasticity – the percent responsiveness of insolvencies to a one percent GDP change. This varies across countries due to differences in economic structure and institutional factors, such as type of insolvency regime.”
Among the countries, the report predicts Turkey (41%), the US (39%) and Hong Kong (39%) are likely to see the biggest jump in insolvency in 2020. Other countries like the Portugal (36%), Russia(35%), Netherlands (36%) and Spain (30%) are also likely to register high insolvency rate in 2020.
The lowest increases in insolvencies are all found in Europe. In Germany, France, Austria, Belgium, Switzerland and Italy, insolvencies are likely to go up by percentages ranging from 6% to 20%.
The report predicts that with removal of lockdown and likely development of vaccine by the first quarter of 2021, some of the countries may see sharp recoveries followed by drop in insolvency cases.
“Our baseline forecast assumes that the global lockdown measures are gradually eased throughout the second half of 2020. Economic recovery is further boosted, as a vaccine becomes available in Q1 of 2021 or, alternatively, a state of the world emerges in which the effects of social distancing on economic activities are largely overcome,” says the report.
It sees strongest decline in insolvencies in 2021 in Southern European countries such as Greece (-17%), Portugal (-12%) and Italy (-10%). “All benefit from a relatively strong economic recovery. Greece is a special case, as it has registered a downward trend in insolvencies in recent years, likely caused by reforms that make it easier to restructure a company without involvement of a bankruptcy court,” observes the report.
The report, however, sees corporate insolvencies rising faster in some countries due to delay in filing for bankruptcy caused by the temporary suspension of court proceedings in 2020. This is the case for Spain (41%), Australia (34%), Canada (22%), France (22%), Switzerland (14%), Norway (9%) and Finland (8%).
