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.
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