Crédito y Caución expects a 26% increase in global insolvencies by 2020

Crédito y Caución forecasts a 26% increase in corporate insolvencies worldwide, which will largely materialise during the second half of 2020. During the first half of the year, measures taken by governments have reduced the expected increase in bankruptcy filings by changing the filing thresholds, reducing the debtor's ability to force bankruptcy or providing sufficient financial support to delay filing. However, as support programmes begin to expire, the number of business insolvency filings is expected to increase rapidly. 

The expected increase is mainly due to the impact that the COVID-19 pandemic is having on world economies. The credit insurer expects all major economies, except China, to enter into recession this year. The depth and duration of this recession will be determined by the ability of individual economies to manage health regulations, avoid confinement and develop in a context of social alienation.  

In Spain, the expected increase is 30%, due to the sectoral composition of the economy and the application of long and rigorous containment. In this respect, the economies of southern Europe are experiencing a greater impact from the coronavirus than those of northern Europe. Southern European economies, such as Spain, Italy, France, Portugal and Greece, are more dependent on tourism. Germany, Denmark, Austria and the Netherlands are less dependent on this sector, have been more successful in containing new outbreaks and their economies appear to be better adapted to the constraints of social disengagement.  

In Germany and Switzerland, the relatively mild forecasts of increased insolvencies reflect the low correlation between GDP and insolvencies, as well as less stringent containment measures. In the European context, the United Kingdom is expected to experience the largest contraction in GDP following tighter containment, to which the uncertainty generated by Brexit is added. Markets such as the United States, Japan and Australia have more positive growth prospects than most European countries. However, the United States, together with Hong Kong and Turkey, is expected to experience the largest increases in insolvencies in 2020.