In 2019, global insolvencies rose for the third consecutive year. Indeed, our Global Insolvency Index, which covers 44 countries that account for 87% of global GDP, is expected to record a +9% y/y increase for 2019. This outcome reflects a prolonged surge in China (+20%) and, to a lesser extent, a trend reversal in Western Europe (+2%) and North America (+3%). In this context, our proprietary Global Insolvency Index bounced back to just slightly below its 2013 level.

On top of this higher number of insolvencies, we identify a persistent high level of failures of large companies – those with over EUR50mn of turnover. The hot spots were construction in Asia; energy and retail in North America and retail and services in Western Europe.

For 2020, we expect another increase in insolvencies, the fourth consecutive year of a rising trend, albeit at the slowest pace since 2016 (+6%).
This outlook reflects a set of challenges that companies will face in 2020 on top of their businessas-usual issues:
(i) a moderate pace of economic growth;
(ii) the lagging effects of trade disputes, notably weaker trade, rise in input costs and supply-chain switches creating winners and losers;
(iii) the lagging effects of political uncertainties and social tensions, notably in terms of inventory issues and loss of business;
(iv) a prolonged discrepancy between manufacturing sectors, which are more exposed to international trade issues, and services sectors, which are benefiting from the resilience of domestic demand.

While the easing of global monetary and financial conditions will help, increased price competition and higher salaries will limit margins and translate into additional woes for a higher number of companies in a majority of countries.

Asia will be the key contributor to the rise in insolvencies (+8% y/y) in 2020, notably due to China (+10%) and India (+11%). Western Europe, where economic growth will remain below the historical threshold which usually stabilizes the number of insolvencies (+1.7%), will see an increase in most countries, but the latter would be moderate, notably in Germany (+3%), Italy (+4%) and Spain (+5%), as well as the UK (+3%). All in all, Western Europe would post a broader but more moderate increase in 2020 (+3%) compared to 2019.

In 2020, we expect four out of five countries to register an increase (compared to 2 out of 3 in 2019) in insolvencies. All in all, this insolvency outlook calls for more selectivity and preventive creditmanagement actions. It calls also for a close monitoring of trade disputes and other political and policy-related risks which will create a high level of volatility all along 2020.

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