Global Bankruptcies are Declining Despite Sluggish GDP Expansion
The global economy is still feeling the after-effects of the 2008-09 financial crisis and the over-investment that preceded it. The fragile recovery has variously been blamed on the unintended consequences of monetary policy, unresolved debt hangovers, fiscal policy constraints that render governments unable to spend their way out of the anaemic growth environment, and generally a lack of global growth engines. Dun & Bradstreet forecasts world GDP expansion to slow to 2.2% in 2016 (from 2015’s already sluggish pace of 2.5%). In spite of diminishing GDP expansion, a clear bankruptcy declining trend is emerging.
What’s Driving the Reduction in Bankruptcies?
Low and falling interest rates, record-low inflation in general – signify stable input costs for companies. Low energy prices, in particular, have made it possible for corporate insolvencies to fall against the background of mostly still-disappointing growth.
What Other Trends Emerged from the 2016 Global Bankruptcy Report?
- Bankruptcy rates have declined in year-on-year terms significantly for 20 of the countries in our sample, and have stagnated for two.
- Ten countries are experiencing increasing bankruptcy rates.
- Bankruptcies, fortunately, are decreasing in several of the world’s largest economies: the US, Germany and Japan.
- The outlook, however, for the three major economies is mixed: in the US and Germany we expect to see a continuing fall in bankruptcy rates, but in Japan the outlook is deteriorating.