Australia/Singapore amongst hardest hit by insolvencies

Credit insurance giant Atradius predicts a 26% rise of insolvencies in 2021. The increase is expected to take place in all major regions and countries, except Turkey.

The upward trend is not a surprise, it states, due to temporary measures that kept insolvencies unusually low in 2020 (insolvency law amendments, fiscal support). But these will be gradually phased out in 2021. The level of bankruptcies at the end of 2021 will be higher in virtually all markets than it was in 2019.

The percentage increase of insolvencies in 2021 is highest in Australia, France, Singapore and Austria, all countries that had strong government measures in place in 2020. 

Pace of economic recovery varies

After a year of global recession, 2021 is bringing new hope as the recovery will set in. Global GDP growth is estimated at 6.0% in 2021, after a 3.7% contraction in 2020. The rollout of vaccines is underway, and positive trial results should boost vaccine availability as the year progresses.

While global growth in Q1 of 2021 is likely to remain modest due to activity restrictions in order to bring Covid-19 numbers down, an acceleration of GDP will take place in the rest of the year.

However, there are still risks to this outlook, mainly linked to the evolution of the pandemic and the success of vaccination campaigns. New COVID-19 infection cases remain high in some countries, such as Brazil, France, Italy and Turkey.

While vaccination has started almost everywhere in the developed world, the pace has to accelerate in order to get a substantial part of the population vaccinated by the end of Q2.

The pace of GDP recovery in 2021 varies significantly around the world. Australia ranks among the best performing developed countries, having the virus effectively under control. Perth’s five-day lockdown in January in response to the detection of one case demonstrates the government’s responsiveness. Australia recorded a relatively mild recession (-2.4%) in 2020, likely to be followed by a 3.5% GDP expansion in 2021.

Japan experienced a 4.9% GDP contraction in 2020, likely to be followed by a partial recovery of 2.7% in 2021. The country experienced a rise of infections towards the end of 2020, triggering a state of emergency. Meanwhile this measure has been lifted for most of the country, except of Tokyo and three neighbouring prefectures, which will remain under restrictions until end-March. While these restrictions will affect the rebound the overall impact will be mild, as the vaccine rollout and stronger growth in the US and China will support economic activity from mid-year onward.