Pedestrians wearing protective masks cross a sign outside a business outside a retail store in Harlem, New York City, on August 25, 2020.
Noam Galai | Getty Images
A new report from trade credit insurer Euler Hermes says the government’s withdrawal of support measures to help companies during the Covid-1 pandemic epidemic will increase business insecurity in 2022.
Globally, business inequality is expected to increase by 15% a year in 2022, Euler Hermes said in a report on Wednesday. This expected increase comes after two consecutive years of decline: bankruptcies fell 12% a year in 2020 and are projected to decline another 6% in 2021, the insurer said.
Even with the expected growth in 2022, overall bankruptcy is likely to be%% lower than in 201 – before Covid spread worldwide, Euler Hermes said.
“Looking at the bankruptcy level, the government has succeeded in helping the company cope with the crisis: massive state intervention prevented two bankruptcies in Western Europe in 2020 and one in three in the United States,” said Euler Hermes, head of the sector and bankruptcy researcher Maxim Lemarle.
“Their expansion will keep bankruptcies at a low level in 2021, but what happens next depends on how the government works next month,” he added.
Since the onset of the epidemic, governments around the world have increased spending to support healthcare systems, families and businesses. Supportive measures include tax cuts and suspensions, state loans and guarantees, as well as cash transfers.
Meanwhile, the central bank relaxes policies to keep money flowing into the economy.
Some governments have begun to bring back those supportive measures, while several central banks have raised interest rates as the global economy recovers from the recession caused by the coup.
According to research by Euler Hermes, business volatility in some emerging markets is returning to pre-epidemic levels. Many of those countries have had to re-impose restrictions and receive less liberal policy support to stem the new wave of Kovid infection, the report said.
Insurers say Africa’s deficiencies will surpass pre-epidemic levels this year, while those in Central / Eastern Europe and Latin America will in 2022.
Euler Hermes hopes the trend of bankruptcy in Western Europe will be mixed:
- Countries including Spain and Italy will see insecurity beyond the level of 201 by 2021 or 2022.
- Countries including Switzerland, Sweden and Portugal may recover from business bankruptcy in 2022, but not yet at the previous level of Covid.
- Large support packages, including France, Germany, and Belgium, and the expansion of these measures will probably keep indigestion low.
Meanwhile, Asia-Pacific countries are expected to see an 18% increase in bankruptcy in 2022, said Euler Hermes. The “strong ge” of %% is expected in India next year after court proceedings were adjourned for a period selected for 2020-2021 due to Kovid, the insurer said.
The combination of “widespread support” in the United States and a strong economic return is likely to keep bankruptcy low in 2021 and 2022, Euler Hermes added.