2 Medium and long-term impacts of the conflict in Europe on global trade, insolvencies and sector performance

Major insolvencies, quarterly number by size of turnover in EURmn

Sources: Allianz Research

Global and regional insolvency indices, yearly level, base 100 in 2019

* GFC: Great Financial Crisis

Sources: Allianz Research

Overall, after two years of declines, Allianz expects global business insolvencies to rebound by +10 percent in 2022 and +14 percent in 2023, approaching their pre-pandemic level.
Western Europe should be close to its pre-pandemic level of business insolvencies by 2022 despite mixed dynamics.
While state support will keep insolvencies artificially low in France and Germany in 2022, the UK could see a sharp rebound.
Another increase in Europe, albeit weaker than in 2021, is expected in Italy and Spain (+6 percent and +8 percent, respectively).
After benefiting from its faster exit from the pandemic and its economic recovery, Asia will also see a trend of divergence. China is expected to keep its annual level of insolvencies under control in 2022 whereas other countries in the region should see more insolvencies due to the deterioration of the environment.
Singapore and India will stand out, the former being back to a high level in 2022 and the latter experiencing a strong catch-up from the long suspension of courts.
The US is the main outlier, with a moderate rebound in insolvencies in 2022 and thus a prolonged low number of cases. US firms are expected to benefit from the buffers accumulated since the pandemic, through the recovery in profits and importantly the Paycheck Protection Program (PPP) government backed-loan that was in place through 2020 and 2021.

Evolution of the net debt ratio and the profitability between Q4 2021 and Q4 2022 (percentage points)

Sources: Refinitiv Datastream, Coface

Food and agriculture organization food price index

Sources: FAO, Coface

Index base 100 = 2014-2016

Based on a recent Coface study, certain sectors have been identified as being most affected by the shock triggered by the war in Ukraine - in terms of repercussions on the financial health of companies in the sector. The axes do not represent 0 percent but the median value of listed companies.
Among the resilient sectors, Life Sciences and Information and Communication Technology stand out.
The energy sector is likely to remain positively impacted in the medium-term overall. In the long-term, it could be negatively impacted should a strong deterioration of the global demand dynamic materialize, in particular if the war in Europe lasts.
In contrast, the study reveals that cyclical and energy intensive sectors such as paper, wood, textile-clothing, transport and agri-food are expected to be the most negatively impacted.
Specifically, the restrictions on trade with both Ukraine and Russia have increased fertilizer prices. These inflationary pressures on fuels and fertilizers are severely affecting the production costs of cereal producers. Therefore, all agri-food segments down the value chain (meat, milk, vegetable oils, etc.) will be negatively affected in short-term.
The consequences are already heavy on consumer prices: +17.9 points (month-on-month) for the Food and Agriculture Organization (FAO) March Food Price Index, which has reached its highest level ever.