+ 20% rise in Insolvencies worldwide anticipated in 2023 !!!
Insolvencies are on the rise in almost 75% of countries globally according to Allianz Trade. The most impacted countries this year are likely to be Austria (+57%), UK (+51%), India (+50%), France (+48%), Australia (+45%), Belgium (+ 42%) and Canada (+35%). SMEs are the most impacted by financial difficulties, nevertheless the risk of default is now spreading to larger firms.
Tighter access to credit, shrinking cash reserves and soaring energy costs have put prolonged pressure on corporate profitability. Political risk remains omnipresent and the war in Ukraine as well as China’s military manoeuvres around Taiwan are keeping the tensions high.
Our country risk measuring tool, the G-Grade reveals the following key changes this quarter:
Egypt: (-0.75) decrease from to 7.50 to 8.25. As one of the countries most impacted by the war in Ukraine, Egypt is suffering from several combined factors: a drop in tourism, a rise in energy prices and a sharp increase in food prices because Egypt is a significant importer (especially wheat and corn). The rise in interest rates has increased the burden of public debt resulting in the country has requesting additional aid from the IMF.
Angola : (+0.5) the G-Grade improves from 8.25 to 7.75. The public debt, which reached an unsustainable level in 2020 (139% according to the IMF), is being significantly reduced (63% expected in 2023). The growth of the GDP which had fallen to -5.6% in 2020, then +1.1% in 2021 has risen to +2.8% in 2022 and is expected to reach +3.5% in 2023; this evolution is largely due to the hydrocarbon market and increasing trade with China (its first economic partner).
Croatia: (+0.5). From to 4.00 to 3.50: Croatia has been less affected than its neighbours by the war in Ukraine and by the energy crisis but has nevertheless suffered because of its economic openness (the country is a major importer). The country joined the Euro zone at the beginning of 2023, which should attract investments in the years to come.
The G-Grade is a rating system developed by AU Group that summarises (on a quarterly basis) the country risk assessment carried out by the 4 main global insurers: Allianz Trade Atradius, Coface and Credendo. It enables the weighting of country risk and promotes better risk management. Our clients, prospects and partners welcome the relevance of this indicator, which contributes to a better understanding of their debtor risk in times of increasing economic and political instability.
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