Euler Hermes analysts: The number of bankruptcies worldwide will increase in 2019
In 2018, the number of bankruptcies in the world increased by 10%. This trend is expected to continue in 2019.
Euler Hermes has verified the number of insolvencies declared by entrepreneurs on the basis of studies carried out in 40 countries, which account for 83% of the world’s GDP. By 2017, the number of insolvencies had been decreasing year on year, but in 2018 the number had increased by 10%. According to Euler Hermes analysts, the number of insolvent entrepreneurs will also increase in 2019.
The number of insolvent entities will be affected by the “soft landing of the world economy”. This will translate into a slower economic growth rate of +3.0% in 2019, from 3.1% in 2018 and 3.2% in 2017.
At the same time, declining demand is expected to increase sensitivity to threats from companies with high fixed costs, as well as those with larger inventories or problems with working capital requirements. In addition, the lack of readily available financing increases the vulnerability of entities with high debt.
Experts from Euler Hermes predict that in 2019 each of 2 out of 3 countries will see an increase in the number of insolvencies of companies. In addition, in some countries, the number of company insolvencies in 2019 will be higher than the average in 2003-2007. The increasing number of insolvencies will have to be faced by countries which in recent years have shown a dynamic growth of economic activity. Young companies may be too weak to adapt to the current reality. Therefore, it is worth to watch out for start-ups.