Covid-19: stop and go for global economy and record number of insolvencies expected in Belgium

  • Covid-19: global economy in stop & go mode until 2022
  • Belgium: a wave of insolvencies will affect more than 23,000 companies by the end of 2021 (+10%)
  • There is not only Covid, political risk could be back like a boomerang: Brexit, US elections, US-Russia dispute, China-US trade conflicts, etc.

According to Euler Hermes’ (Allianz) latest economic forecasts, world leader in trade credit insurance, the global economy will operate in stop and go mode until the end of 2022. Global GDP should have a negative growth of -4.7% in 2020. The US (-5.3% in 2020) and the Eurozone (-7.9%) are especially affected.

After a post-lockdown rebound in Q2 2020, the global trade recovery will slow down until at least mid of 2021, according to our economists’ latest forecasts. Global trade of goods and services will experience an unprecedented fall of -13% in 2020, which represents 4 trillion US dollars of trade losses. In this context, the number of bankruptcies around the world will drastically increase in the coming months: + 31% until the end of 2021.

Until now, temporary adjustments to insolvency regulations in different countries and strong support measures for the economy have helped in the limitation of the negative effects. But beware of the massive reversal of the bankruptcy trend in the coming months.

Belgium: unprecedented fall of the economic growth and record amount of bankruptcies

For Belgium, our economists forecast a negative GDP growth of -7.8% in 2020. The number of bankruptcies will increase sharply during Q4 2020 and the first half of 2021: in total, the wave of bankruptcies in Belgium will affect more than 23,000 companies by the end of 2021, an increase of +10% compared to the pre-Covid situation in 2019. According to Euler Hermes calculations, Belgium will count 76,000 job losses and the unemployment rate will climb to 8.5% by 2021.

Ed Goos, Euler Hermes BeLux CEO:

There is not only Covid…

In addition to this gloomy economic context, political risks could be back like a boomerang. According to our economists, odds of a no-deal Brexit have reached 45%, while the US elections are paving the way for new contests (according to Euler Hermes, the probability of a victory of Biden, the Democratic candidate is 70%), the technology war between the US and China and tensions in the Mediterranean Sea and US-Russia dispute will remain top of mind.

Read the full report here.

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