Global insolvency index: more bankruptcies in 2020
A poor forecast: a further increase in the number of insolvencies worldwide can be expected as well this year. As the credit insurer Euler Hermes reports in its global insolvency outlook 2020, the number of bankruptcies is expected to rise by six percent – making it the fourth year in a row.
At the same time, however, the study results also point to a slower progressive increase in insolvencies. By way of comparison: in 2019, global corporate bankruptcies rose by nine percent – three percentage points more than what is expected for the current year. In addition, the amount of losses last year also increased significantly by almost 40 billion euros to 145 billion euros, even though the number of major insolvencies worldwide remained stable in the first three quarters.
The poor balance sheet for 2019 was mainly due to sluggish macroeconomic development. This affected both the emerging markets and the industrialized countries: While the insolvency index had risen by a full 20 percent in China, it also rose in North America (+ 3 percent) and Western Europe (+ 2 percent). At global level, the retail trade, construction and the service sector were particularly hard hit.
Forecast for 2020
According to the authors, the current year will also bring numerous economic, political and social challenges that will present companies with new challenges. These include, for example, the delayed impact of trade disputes and continued moderate economic growth. Moreover, an effective brake on insolvency rates is not to be expected.
With regard to developments in the individual countries, the trend of the past year is likely to continue. According to the study, a further increase in insolvencies is expected particulary in Asia (+ 8 percent), mainly due to the numbers in India (+ 11 percent) and China (+ 10 percent). In Western European countries, the situation looks somewhat better, but here too there is no easing in sight. In Germany (+3 percent) and Great Britain (+3 percent), as well as in Italy (+4 percent) and Spain (+5 percent), corporate bankruptcies will continue to increase.