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Global monetary tightening and supply chain issues putting significant pressure on global trade and insolvencies
World GDP growth (annual average, percent)
Sources: IMF, National statistical institutes, Refinitiv Datastream, Coface forecasts
- The economy is settling into a regime of “stagflation”, with very limited growth and rapidly rising prices. The possibility of a global recession is also becoming more proximate.
- Following the complete shutdown of the Nord Stream gas pipeline at the beginning of September, the energy crisis triggered by the war in Ukraine is intensifying. Europe is preparing for “imposed” sobriety, as the European Union has finally agreed on a plan to reduce gas consumption, while some industries have announced that they would reduce their production to cope with soaring energy costs.
- The major central banks, led by the U.S. Federal Reserve, remain resolutely aggressive to contain inflation. Breaking the low interest rate environment that prevailed following the global financial crisis (2008-2009), particularly in the advanced economies, most of them (United States, Canada, Europe, United Kingdom, Australia, etc.) have already returned to key interest rate levels unseen in the last decade.
- The Chinese economy is experiencing difficulties: the real estate crisis is still simmering and the “zero-COVID” policy continues to penalize domestic activity, with repercussions on supply chains in Asia, Europe, the Americas, and Africa.
- After two years of declines, a broad-based acceleration in business insolvencies is to be expected globally, with current estimates standing at +10 percent in 2022 and +19 percent in 2023.
- During the COVID-19 pandemic, there was a strong decline in insolvencies (globally insolvencies fell by a cumulative 29 percent in 2020-2021), mainly due to i) changes to insolvency legislation (often temporary) to protect companies from going bankrupt and ii) government economic and fiscal support for businesses.
- In 2021 there was a partial adjustment to normal, pre-pandemic insolvency levels, a process that continued in the first half of 2022. This coincided with the phasing out of government support programs.
- At the start of the third quarter of 2022, support programs are phased out in all countries, except New Zealand and Hong Kong.
- For the countries with the highest increase in insolvency rates for 2022 (Austria, United Kingdom, France, Australia, Canada, and Belgium), fiscal support was phased out in the first half of 2022 and the adjustment to normal has already started and will continue into 2023.
- On the other side of the spectrum, in New Zealand and Hong Kong, we see a substantial decrease in insolvencies in 2022. This is also because in their case the fiscal support is expected to extend until the end of 2022.
Insolvency growth forecasts in 2022 and 2023
Sources: Atradius