According to the economists of Euler Hermes, the Covid-19 crisis creates a time bomb in terms of defaults and insolvencies. It is still the calm before the storm at the moment. Even though economic activity is now gradually picking up again, Euler Hermes predicts that the majority of insolvencies will still be coming our way, mainly at the end of 2020 and in the first half of 2021.
A few figures:
- Globally, the number of insolvencies will increase by +35% by the end of 2021. This is an unprecedented increase. The United States (+57%), Brazil (+47%) and China (+20%) will have the highest number of insolvencies, followed by most European countries (especially in 2021).
- According to the forecasts of the economists of Euler Hermes, the number of insolvencies in Belgium will increase by 26% (2021 vs. 2019). This increase will mainly occur in 2021, with a record number of almost 13,500 corporate insolvencies next year.
- A premature withdrawal of supportive policy measures could make things worse, increasing the surge in insolvencies by +5 to +10 percentage points.
- The insolvencies of major companies (with a turnover of more than USD 50 million) are adding pressure along supply chains. They not only put at risk clients by potentially disrupting their supplying, forcing them to urgently find (costly) alternatives, they also put their own suppliers at financial risk by not paying them - and forcing them to undertake long and expensive legal procedures. The larger the company filing for bankruptcy, the higher the risk of a domino effect.
Read the full reports of Euler Hermes’ economists here.
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