In 2016, companies struggled to stay resilient despite robust support
from policymakers. Strong deflationary pressure and subdued global demand made
life harder for businesses. After two years of substantial declines in
insolvencies, in 2016 our Global Insolvency Index will record a limited drop of
-2%. Indeed, the downward trend in global insolvencies is coming to an end.
This is happening because global growth fails to accelerate and will linger
below +3% in the upcoming years. Thus, companies are more vulnerable to
external shocks. Bankruptcies are on the rise in Asia-Pacific and in the
Americas, and Europe’s improvement is fading.
We expect worldwide insolvencies
to rise by +1% in 2017. At a global level, the contained return of inflation
should provide only limited relief to corporate turnovers, while companies will
face higher input costs and upward wage pressures, in addition to tighter
financing conditions. The +45% surge in the number of major bankruptcies
registered in the first three quarters of 2016 is a source of second-round
turbulences. Top bankruptcies will have a domino effect, with adverse
implications for fragile suppliers. Special focus: Zombie State-owned
enterprises (SOEs) around the world, what are the risks?