According to Allianz Trade, global business insolvencies are predicted to grow +21% in 2023 and +4% in 2024, following a slight rebound of +2% in 2022 following two years of reduction due to the pandemic.
According to the trade credit insurer, worldwide business insolvencies may be -5% lower than pre-pandemic levels in 2023 and -1% lower in 2024.
“The global recovery in business insolvencies is picking up speed: Allianz Trade’s Global Insolvency Index is expected to rise further in the coming years.” However, Allianz Trade believes that “this significant increase may not be enough for insolvencies to reach their 2019 levels.”
According to Allianz Trade, “half of the countries in its panel are likely to see insolvencies exceed pre-pandemic levels in 2023, and three out of five in 2024.” To summarize, most countries are anticipated to outperform current 2019 levels by the end of 2024.”
As per Maxime Lemerle, Allianz Trade’s senior analyst for Insolvency Research, France will have (+41%) insolvencies in 2023, the UK (+16%), Germany (+22%), and Italy (+24%).
Lemerle stated that it forecasts a (+49%) increase in business insolvencies in the United States in 2023 as a result of tighter loan conditions and a predicted significant economic slowdown.
“We estimate that for the level of insolvencies to stabilize in the Eurozone and the United States, additional GDP growth of 1.3pp and 1.5pp, respectively, would be required in 2023-2024.” Furthermore, businesses must be wary of domino effects: the number of insolvencies for companies with revenues greater than EUR50 million is now somewhat higher than pre-pandemic levels. “The most affected industries are construction, retail, and services,” Lemerle reported.
According to Allianz Trade, insolvencies in Asia Pacific are predicted to reach +12% in 2023 and +5% in 2024.
While in Asia, China should witness a small increase (+4%) in 2023 and (+5%) in 2024, as the insurer stated, the reopening of lockdowns has not eliminated all risks, particularly in the real estate and construction sectors.
Allianz Trade anticipates that other nations in the region will experience increased insolvencies as a result of negative factors influencing the region, such as rising interest rates and inflation, most notably Australia (+15%) in 2023, Japan (+12%) in 2023, and India (+36%) in 2023.
“While Asia and Latin America are the only two regions not seeing their insolvencies back to 2019 levels by 2024, the spillover of financial stability concerns has increased corporate risks, while demand is likely to remain well below the minimum required to at least keep insolvencies in check,” said Paul Flanagan, Regional CEO of Allianz Trade in Asia Pacific.
“We expect the most vulnerable sectors and companies to be hit the hardest, such as those most vulnerable to the global slowdown; those benefiting less from China’s earlier-than-expected reopening; those in labor-intensive sectors and most vulnerable to wage recovery; and those most vulnerable to rising interest rates,” Flanagan said.