Expectation of a large increase in bankruptcies

Allianz Trade published the “Global Bankruptcy Report” for the second time this year.

According to the report, after a marginal recovery of 1 percent in 2022, global insolvencies will increase by 6 percent in 2023 and 10 percent in 2024.

The acceleration of global corporate insolvency momentum is driven by declining corporate income, reduced pricing power and weakening global demand.

UNEXPECTED IMPROVEMENT BEFORE 2025

The report also notes that, as of the second quarter of 2023, the decline in company revenue has spread to all regions for the “first time” since mid-2020.

This situation, combined with current high costs, is said to reduce profitability and, as a result, liquidity positions are deteriorating rapidly and are not expected to improve before 2025.

Allianz Trade CEO Aylin Somersan Coqui, whose views were included in the statement, reported that companies still have a significant cash surplus in the euro zone with 3.4 billion euros and in the US with 2.5 billion dollars, and said: “However, These cash cushions are the cash cushions of the largest companies.” It remains and concentrates on certain sectors such as technology and consumer products. “And at this juncture, where low economic growth will last longer, most companies cannot increase their cash position through operations.”

MOST IN THE NETHERLANDS AND THE USA.

According to information provided in the report, by the end of 2023, the normalization of business bankruptcies will be complete in most developed economies and 55 percent of countries will see large double-digit increases in bankruptcies.

These countries include the US with a 47 percent increase, France with 36 percent, the Netherlands with 59 percent, Japan with 35 percent and South Korea with a 41 percent increase.

Globally, three in five countries, including major markets such as the United States and Germany, will reach pre-pandemic levels of corporate insolvency by the end of 2024, the report also states.

According to the report, GDP growth needs to double for insolvency figures to stabilize on both sides of the Atlantic, which cannot happen before 2025. (BRITISH AUTOMOBILE CLUB)