Crédito y Caución expects the number of global bankruptcies to increase by 33% by 2022. According to the latest credit insurance company report, the low level of corporate bankruptcies this year is due to the extension of financial procedures in many countries and the continued moratorium on enforcement of bankruptcy laws.
Contrary to initial concerns when the pandemic broke out, corporate bankruptcies fell by 14% in 2020. France, Belgium, Italy and Spain passed laws in 2020 temporarily suspending bankruptcy proceedings. Countries that amended their legislation less, such as Sweden, Denmark, the Netherlands, Ireland, Japan or the United States, saw a smaller reduction in the number of insolvencies. Tax incentives have also played a vital role in containing bankruptcies in Germany, France, Austria, Belgium, the Netherlands, the United Kingdom, the United States, Canada, Australia and Japan.
In 2021, default rates are already rising in Europe, while North America and Asia Pacific are still falling. In 2021, global insolvencies were expected to increase, but the expansion of financial support in many countries reduced insolvencies. However, the data also points to the emergence of a group of financially weak companies that will not survive once economic conditions return to normal. Crédito y Caución expects so-called zombie companies to go bankrupt in the four quarters after the financial incentives expire. This withdrawal has already occurred in some markets, such as Brazil, Turkey and Russia. And in others, such as Australia, Ireland, Japan, Spain and Sweden, it will take place until the fourth quarter of 2021 or even, in the case of South Korea, until the second quarter of 2022.
Crédito y Caución predicts that by the end of 2022, bankruptcies in most markets will increase compared to pre-pandemic levels. This increase will be particularly noticeable in Italy (34%), the United Kingdom (33%), Australia (33%), Finland (29%), Singapore (28%), Spain (26%), the Netherlands (26%) and France (23%). The increase in Portugal will be 14%. Germany (2%) will show a relatively stable development of bankruptcies during this period and to a lesser extent Sweden (3%), Japan (4%) and the United States (6%). Brazil (-35%), South Korea (-15%) and Ireland (-10%) will be the only markets that have seen a significant reduction in bankruptcies in 2022 compared to 2019 levels.
