In Spain, the increase foreseen by the credit insurance company reaches 30%, due to the sectorial composition of the economy. Crédito y Caución forecasts an increase of 26% in corporate insolvencies worldwide, which will largely materialize during the second half of 2020. During the first half of the year, governments tried to reduce the expected increase in bankruptcy filings by modifying filing thresholds, reducing the debtor’s ability to force bankruptcy or providing sufficient financial support to delay filings. However, as support programs begin to come to an end, the number of business insolvency filings is expected to increase rapidly.
The expected increase is primarily due to the impact of the Covid-19 pandemic on world economies. The credit insurer expects all major economies, except China, to enter into recession this year. The depth and duration of this recession will be determined by the ability of individual economies to manage health regulations, avoid confinement and develop in a context of social distancing.
In Spain, the expected increase is 30%, due to the sectoral composition of the economy and the application of a long and strict lockdown. In this respect, the economies of southern Europe are experiencing a greater impact from the coronavirus than those of northern Europe, since Southern European economies, such as those of Spain, Italy, France, Portugal and Greece, are more dependent on tourism. Germany, Denmark, Austria and the Netherlands are less dependent on this sector, have managed to contain new outbreaks better and their economies seem to adapt to social distancing restrictions better as well.
In Germany and Switzerland, there are forecasts of a mild increase in insolvencies which reflect the low correlation between GDP and insolvencies, as well as less strict Covid-19 containment measures. In the European context, the United Kingdom is expected to experience the largest contraction in GDP following a strict lockdown, coupled with the uncertainty generated by Brexit. Markets such as the United States, Japan and Australia have more positive growth prospects than most European countries. However, the United States together with Hong Kong and Turkey are expected to have the largest increases in insolvencies in 2020.