A sharp rise in global business insolvencies is expected for 2024 at +11% while the increase in Asia Pacific is limited to +3%
- More than half of global GDP will face double-digit increases in business insolvencies in 2024
- Singapore (+39%), New Zealand (+32%) and South Korea (+19%) to face major rises
- Japan, Australia, New Zealand and South Korea could see trend reversal from next year
In its latest Global Insolvency Report, Allianz Trade reveals a more severe outlook for the global business landscape, with insolvencies projected to climb by +11% in 2024 – an even steeper rise than previously anticipated. The report highlights key trends and risks for businesses worldwide, as the global economy grapples with sluggish demand, ongoing geopolitical tensions, and uneven financing conditions.
Asia Pacific: +3% increase in 2024 and +1% in 2025 but subject to China’s overall performance
Asia is on track to record higher-than-expected increases in most economies in 2024, with major rises notably in Singapore (+39%), New Zealand (+32%) and South Korea (+19%) – while India and Taiwan as the only exceptions if China confirms the upside trend timidly started in mid-2024. As it accounts for 61% of our regional index, China plays a key role in the regional picture with insolvencies are expected to reach +3% y/y increase in 2024 (+8% without China) followed by +1% in 2025 (-5% without China).
China is set to end 2024 with another low number of insolvencies with less than 6,600 cases, i.e. 45% below the record levels of 2019-2020. However, and despite the PBOC’s super package at the end of September, we expect the economic slowdown and weaker potential growth to gradually lead to a rebound in business insolvencies (+5% and +6% in 2025 and 2026 respectively), pushing them above pre-pandemic numbers.
Meanwhile, Hong Kong will register its largest number of business insolvencies in 2024 since 2010 with more than 400 cases, evidencing that specific challenges can lead to a rise in business insolvencies despite a more favorable economic cycle. After four years of increases, we expect the number of cases to remain above its 2010-2020 average in 2025 and 2026 (380 and 370 cases respectively), with tailwinds from the rebound in global trade compensating for headwinds from the domestic demand slowdown.
A faster-than-expected global acceleration
When Allianz Trade released its first global insolvency forecasts in February, the company was already expecting a strong increase in 2024 (+9%) followed by a stabilization in 2025. However, recent developments have led to an even grimmer picture, with a +11% rise now forecast for this year, followed by a peak in 2025 at +2% (+2pps vs previous forecast). Business insolvencies will therefore not stabilize until 2026, and even then, they will remain at high levels.
In the US, Allianz Trade expects insolvencies to rise by +12% in 2025 before falling by -4% in 2026. In Germany, they will increase by +4% before falling by -4% in 2026. In France and the UK, they will slightly moderate from very high levels (-6% in 2025 for both vs -3% and -4% in 2026 respectively) while in Italy they will continue to rise (+4% and +3% respectively).
More than half of the global GDP will be hit by double-digit increases
Year-to-date, business insolvencies have already increased by +9% and the rise has been broad-based across geographies and sectors. Globally, Allianz Trade’s 2024 insolvency index is likely to stand +13% above its 2016-2019 average, but -11% below its Global Financial Crisis[1] level.
“This global rollercoaster ride in business insolvencies is partly due to still-subdued global demand, persistent geopolitical uncertainty, and uneven financing conditions. It can also be explained by the ‘backlog’ of insolvencies, as companies are no longer shielded by the support measures put in place during the pandemic and the energy crisis. That’s why countries accounting for more than half of global GDP will be hit by double-digit insolvencies increases in 2024, and two-thirds may surpass their pre-pandemic numbers this year. Construction, retail, and services have been hit the hardest, both in terms of frequency[2] and severity[3]”, adds Aylin Somersan Coqui, CEO of Allianz Trade.
Can lower interest rates be a game changer for corporates?
While a gradual easing of monetary policies could offer some relief, it won’t be a silver bullet for struggling businesses. Lower interest rates reduce borrowing costs, improve cash flow, and boost profitability but they cannot fully address the financial challenges looming over companies.
“Corporates have already been deleveraging and adjusting to high rates. Our analysis suggests the current easing cycle (-2pps by September 2025) would lead to -4pps reduction in the insolvency trend, thanks to higher margins (up to +2pp in Germany, +4pps in France, +3pp in the UK and +2.8pp in the US). However, this would only slightly offset the overall increase in the US, for example, and reinforce the decrease in France”, ends Maxime Lemerle, Lead Analyst for insolvency research at Allianz Trade.
[1] 2008-2010
[2] Number of companies hit by insolvencies
[3] Size of companies hit by insolvencies
