Insolvency outlook: post-pandemic
adjustments or an adverse new normal?
Atradius Economic Research – March 2024

Summary


In 2023 we observed a surge in insolvencies, with our global index showing an increase of 32%. For most markets thisincrease reflected ongoing post-pandemic adjustments after three years of persistently low levels. For the other remaining
markets insolvencies have stabilised at a level above pre-pandemic, suggesting the emergence of an adverse new normal
where companies face higher interest rates and lower demand.
Our forecast for 2024 and 2025 is driven by the degree of adjustment to pre-pandemic levels in the markets where thenormalisation is still in progress and by purely economic factors where a stabilisation to the new normal has alreadyoccurred.
Overall, we expect globally in 2024 an increase of 16%, followed by a minor decrease of 1% in 2025.
However, there is a wide variation in the growth rates across markets. We expect high increases in the markets where theadjustment from low levels still has to occur (such as Singapore, Italy, the Netherlands, Poland and the United States).
Conversely, we forecast high decreases in markets where insolvencies already overshoot their pre-pandemic levels (suchas South Korea, Ireland, Canada and Finland).
Finally, in markets where insolvencies seem to have stabilised (such as Czech Republic, Austria, Belgium, Romania,Norway, United Kingdom) we expect smaller fluctuations.

Challenging economy clouds
businesses’ ‘return to normal’Global insolvencies are soaring as businesses grapple
with the double whammy of sputtering economic
activity and the phasing out of pandemic-era support.
After increasing by a staggering 32% in 2023,
insolvencies are virtually back to their level from 2019.
But we don’t expect to see insolvencies stabilise just yet.
Instead, we project another substantial rise of 16% in
2024, followed by a stabilisation in 2025.
For most markets, the post-pandemic surge ininsolvencies is still ongoing and it is difficult to assess
whether this is a post pandemic adjustment or whether itwill lead to a stabilisation to an adverse new normal.

During the pandemic insolvencies contracted massively
almost across all markets as a result of the government
support. Thus, we believe that the rise in insolvencies in
the most recent data is to a large extent still due to postpandemic related adjustment. However, for a minorityof markets we do see insolvencies stabilising at levels
higher than before the pandemic, which makes us
believe that the current economic environment is also
contributing to the formation of an adverse new normal.
The post-pandemic economic recovery has largely run its
course and the global economy is losing steam, withgrowth slowing 0.3 percentage points to 2.4% this year.
Inflation has eased but not yet confidently to target rates.
As such, central banks are still cautious to loosen theirpolicies, keeping interest rates at high levels at least until
later this spring. Therefore, the pressure that businesses

Out of the 29 markets that we monitor in this report, 24
registered increases in insolvencies. To better visualise theinsolvencies snapshot for 2023, we classify markets across
two dimensions. First, we group countries into “stable” and“deteriorating” depending on their insolvencies growth ratefor 2023. If the growth rate falls into the -15%/+15% interval,then we consider that country as “stable”, while a growthrate higher than 15% we assign as “deteriorating”. There
were no countries with a growth rate lower than -15%, so the“stable” and “deteriorating” groups cover all the countries inour sample.
Second, we group countries depending on their average
insolvency level in 2022 relative to their pre-pandemiclevel. This is important for interpreting whether the 2023
dynamics are due to pandemic related adjustments or due toadditional factors in the economic environment such as highinterest rates or lower demand. During the pandemic, wewitnessed insolvencies decreasing almost across all markets
as a result of the strong government support. Therefore, astill low level of insolvencies in 2022 relative to the prepandemic indicates that a positive growth rate for 2023 iscontributing to an adjustment to pre-pandemic levels.
We use as a reference the 2019 mean insolvency level. If theinsolvencies in a given market have reached at least 95% of
this reference level, we classify insolvencies in that market
as “above” the normal, while in the opposite case it is“below” the normal.

Deteriorating

Insolvency matrix 2023
Sweden, Ireland, New
Zealand, France,Germany, Australia,Japan, Norway, HongKong, Italy, USA,
Netherlands

Stable2023 brings an overall increase in
insolvencies, with a wide variation
across markets

Figure 1 Insolvencies deteriorate in 2023 mostly in markets thatstarted out with a low insolvency level relative to pre-pandemic

2023 growth

face from higher interest rates will persist this year andmay only see relief in 2025, given the lagged effect ofmonetary policy. The latest bank lending surveys in theboth the US and eurozone for instance both showed
expectations of further tightening of lending standards
for companies in the coming months. This adds evenmore pressure for firms as the cash buffers that many
companies amassed during the pandemic have now been
largely exhausted. With less capacity to mitigate theeffects of the broader economic slowdown, we anticipate
higher insolvencies in the coming years.

Turkey, UK, Switzerland,
Belgium, Portugal,
Spain, Denmark, Czech
Brazil, Poland, Singapore
Republic, Romania,
Austria

Below

South Korea, Finland,
CanadaAbove2022 level relative to pre-pandemic
Source: Atradius

The main message from figure 1 is that insolvencies
deteriorated in 2023 mostly across the markets where
their level relative to pre-pandemic was still low. In otherwords, the deterioration of insolvencies that we see inthe aggregate is to a large part still related to thenormalisation to pre-pandemic levels. This is visible inour figure as most markets marked as “deteriorating” aregrouped in the north-west quadrant. Here the largest
adjustments were experienced by the Netherlands,
United States, Hong Kong, Japan and France, allcountries with very low insolvency numbers at the startof 2023. Figure 2 shows that in 2023 for most of thesemarkets, insolvencies remained below or slightly
overshot their pre-pandemic level. Thus, the default risk
remained comparable to the pre-pandemic period. Still,in a few cases, namely Sweden, Ireland and Australia,
insolvencies considerably overshot their pre-pandemiclevels, indicating an elevated default risk.

Applying these two classifications, we can group countries
in four quadrants that are reproduced in the matrix in figure1. Additionally, to assess the overall riskiness of a given
market relative to the pre-pandemic, we compute in figure 2
the 2023 mean insolvency levels relative to the mean 2019
insolvency level.

Atradius Economic Research 2

Figure 2 Average insolvency levels in 2023 relative to prepandemic still vary considerably across markets

Outlook 2024 and 2025: remaining
post-pandemic adjustments vs.
stabilisation to the new normal
We now turn to our insolvency forecast for 2024 and2025, which are given in year-on-year percentagechanges (e.g., total for 2024 compared with total for2023.
Figure 3 presents our forecasts aggregated for all
markets and on a regional level. Globally, we predict that
insolvencies increase by 16% year-on-year in 2024. We
foresee a relatively strong increase of insolvencies inNorth America (25%), which is virtually driven by theUnited States. For Europe, we expect a somewhat smaller
increase of 12% as the process of normalisation of
insolvencies in most European countries is moreadvanced. For Asia Pacific we predict a relatively stabledevelopment overall, with a decrease of just 2%, asnormalisation from high levels in some markets (e.g.,South Korea) and from low levels in others (e.g.,Singapore) mostly cancel off each other. In 2025 we see
insolvencies slightly decreasing by 1%, reflecting
decreases across all regions except North America.
Figure 3 Across regions, in 2024 insolvencies are expected toincrease the most in North America

Figure 1 also shows that there is a minority of markets thatstarted 2023 with insolvency levels already above the prepandemic level and that increased further in 2023. In thisgroup fall only three countries, South Korea, Finland andCanada. Figure 2 shows that these markets are among thetop ranked in terms of the overall default risk in 2023 andthat this is considerably higher relative to the pre-pandemic
period. Our interpretation is that the surge of insolvencies inthese countries is relatively short-lived as it is coming fromdefaults in zombie companies that survived throughout thepandemic. We define zombie companies as those companies
that would have defaulted in normal times but were savedby the pandemic related government support.
Next, figure 1 shows that there is a substantial number ofcountries where insolvencies seem to have stabilised. In thesouth-east quadrant we group the countries withinsolvencies that stabilised around or above our prepandemic reference. Here we note Turkey, United Kingdom,
Switzerland and Spain that ended up in 2023 with aparticularly high level of insolvencies relative to 2019. We
interpret that insolvencies in these countries reached a newnormal, higher than the pre-pandemic, due to the adverse
economic conditions that they are facing.

Figure 4 presents our insolvency forecast for 2024 and2025 on a country level. The markets are arranged in theorder of the growth rates for 2024 as these exhibit morevariation. This is because we assume that most of thepandemic related adjustments will occur in 2024. The
dynamics of our forecast for 2025 are therefore mostly
associated with a normalised environment and are givenby the dynamics of GDP across markets.

Conversely, in the southwest quadrant we see a group of
5 countries where insolvencies remained relatively
stable at low levels relative to pre-pandemic. Ourinterpretation is that here companies were able tomanage better the liquidity that they acquired during thepandemic. This is the case for Belgium, Singapore andPoland where insolvencies did increase, but at a slower
pace. For Brazil we note that insolvencies stabilised earlyin the pandemic, as the government support towards
companies was not that sizeable.

Atradius Economic Research 3

Figure 4 In 2024-2025, we still expect a wide variation ofdynamics in insolvencies across markets, mostly reflecting thevariation in the adjustment to pre-covid levels at end-2023

The highest insolvency growth rates in 2024 are recorded inItaly, Singapore, the Netherlands, Portugal, Poland andUnited States. For all of these countries insolvencies were at
the start of 2024 still below the normality level, as alreadyshown in figure 2. Thus, we expect high increases ininsolvencies for these markets in 2024 such that thenormalisation is achieved. Italy is an exception in this groupas it is the only country where we did not observe any signsof normalisation, with the latest available data up to2023Q3. We see however no reasons that the normalisation
should not start from 2023Q4.
At the other side of the spectrum, for countries with thehighest decreases in insolvencies in 2024 are South Korea,Ireland, Canada and Finland. These experienced in 2023 asurge in insolvencies reaching levels higher than prepandemic. Therefore, we expect them to normalise
downwards in 2024.
Finally, for the markets in the middle range in figure 4, theinsolvencies growth rates for 2024-2025 are relativelysmall. For some of these insolvencies seem to have peaked
and the downwards normalisation is expected to take placein 2024-2025 (Japan, Sweden, France, Germany, Denmark).
For the others, insolvencies seem to have stabilised to thepost-pandemic normal (Czech Republic, Austria, Belgium,
Romania, Norway, United Kingdom) and their evolution ismostly given by the dynamics of the economic environment.

Iulian Ciobica, Economist
iulian.ciobica@atradius.com+31 20 553 2121
Dana Bodnar, Economist
dana.bodnar@atradius.com+31 20 553 3165

Atradius Economic Research 4

Table 1 Total insolvencies - annual percentage change

Australia
Austria
BelgiumBrazilCanadaCzech Republic
Denmark
FinlandFranceGermany
Hong Kong
Ireland
Italy
Japan
Netherlands
New Zealand
NorwayPolandPortugal
Romania
Singapore
South Africa
South Korea
Spain
SwedenSwitzerland
TurkeyUnited Kingdom
United States

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

20222023e

2024f

2025f

91

2-19

16-16-8

3

3-41-943

45

11-8-83-10-1-5

1-3-2

1-40

0

57

13

2-1

7

4

11-9-9-6

9-1

7-32-9

42

11

90-12

78-1

12-13

290-1-25-10

8

109

1

13-11-2-2-1-7-6-1

3-23-1038

41-7-15-4------10-15-16

4-10

21-6-6

3-22

4-15-21

15

18-4

7

6-14-230910

306-5-14-6-10

173-1916725-7-3-1

3300-8-6-1-5-40-1150

37

0-5-6-6-8-7-4-7-7-4-3-16-12

4

220-3-12-13

2

15

3

1-9-14-6

9-14

6-25

38-5

7

3-19-15-10-2-15-13-25

1-30

25

33-18-1

2-1

22

12-5-9-11-60-32

18-20

23

63-15-4-5-10-10-9-40-2

2-7-22735-2-40

19

10-22-24-19-22-94-17-41

14

48

38

3-12-4-5-2-10-6-93-10-17-7

11

21

11-3

0-13

18

6-3-1

4123-11-24

13

226-1

424

1-9-7-19-2

4-50-30-13

13

29863

53

7-6-4-12-8-9-5-18-3

7

3

34

3-936

10-30-50-18

9-9-21-13

88-1

40
20-1

14

14-12

1

1-9

1-1-414-4

14

47-11-24-13-13-5-1-3-1

110-5-1-11-10---17926-61516

15-11

565-32-8203714-28-23-17-2-110-13

30

6-14

13

1-474-6-11-5

6132-1-10630-1-13

63-5-1047322-3-14

937-1

12

11278-9-13-1019-8

3

14

841

6

14

44-4-9-8-10

1-1

107-261157

147-1-15-16-17-19-8-2-4-4

3-5-34-6

40

29

3

Sources: Atradius, Macrobond, national sources

Table 2 Total insolvencies - index, 2019 = 100

Australia
Austria
BelgiumBrazilCanadaCzech Republic
Denmark
FinlandFranceGermany
Hong Kong
Ireland
Italy
Japan
Netherlands
New Zealand
NorwayPolandPortugal
Romania
Singapore
South Africa
South Korea
Spain
SwedenSwitzerland
TurkeyUnited Kingdom
United States

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023e

2024f

126

128

130

106

122

102

94

97

100

59

54

77

112

124

2025f
115

117

120

109

108

103

104

101

99

100

60

60

95

107

109

108
105

96

100

111

101

92

87

94

93

100

68

62

87

97

105

70

75

81

81

90

78

101

101

100

75

68

73

80

87

88

133

118

116

113

112

105

98

97

100

77

69

95

135

125

106

----

148

134

114

96

100

90

109

103

97

100

95

97

101

86

68

7891

88

94

100

86

84

109

119

120

120

112

113

119

114

98

92

83

97

100

81

94

101

126

118

114

116

119

122

122

122

113

106

105

100

60

53

80

110

110

105

161

151

139

128

123

115

107

103

100

84

75

78

95

95

92

103

105

121

125

126

115

98

92

100

86

92

68

95

90

78

288

296

240

205

185

182

154

133

100

101

71

88

117

95

94

103

102

125

139

133

121

107

100

100

68

81

64

80

130

110

152

145

129

116

105

101

100

98

100

93

72

77

104

101

97

218

259

284

221

168

136

106

97

100

83

49

56

82

113

116

159

153

145

141

127

119

108

111

100

83

77

86

104

116

112

79

69

81

86

83

83

86

97

100

89

67

76

9399

98

121

150

152

138

128

103

101

105

100

100

70

61

70

90

97

97

149

160

150

143

126

116

106

100

82

79

85

87

117

121

301

411

454

317

157

128

140

127

100

87

94

102

101

105

105

93

106

121

107

108

109

100

101

100

59

61

58

67

98

118

174

133

116

101

96

95

91

90

100

100

95

93

83

82

82

-

-

-

58

63

79

75

87

100

115

103

108

178

120

110

131

180

206

148

114

94

92

91

100

87

113

120

104

118

119

93

99

103

96

86

82

86

98

100

99

89

94

122

120

104

84

86

82

74

77

82

84

103

100

86

94

128

126

141

143

107

114

124

113

98

88

105

97

100

114

122

173

183

209

217

118

113

103

95

85

8585941007482

129

147

157

155

209

175

146

118

108

106

102

98

100

95

6359

83

107111

Sources: Atradius, Macrobond, national sources

Atradius Economic Research 5

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