Insolvencies in Asia are expected to see a moderate increase next year before stabilising in 2025, as a result of the weaker regional and global environment, said Allianz Trade recently.
At the regional level, this would translate into a +5% y/y increase in 2024 and +3% in 2025, the trade credit insurer predicted.
China has so far proved to be successful in maintaining a low number of insolvencies, the firm observed.
However, given the sluggishness of growth outlook due to softer global demand, prolonged worries in construction activity and real investments as well as the financing issues, the firm expects a rebound in insolvencies going further, albeit a moderate one (+5% in 2024 and +6% in 2025).
As for Hong Kong, Allianz Trade expects the gradual normalisation of the economy since the re-opening of China border and the lifting of Covid restrictions to finally support a stabilisation of business insolvencies after three years of increase between 2021 and 2023.
Insolvencies in Hong Kong are expected to decrease by 6% and 3% in 2024 and 2025 respectively, the firm said.
But insolvencies in Asia are expected to deteriorate in most other markets, notably South Korea (+41% expected for 2023 and +2% in 2024), Japan (+35% and +7%), Australia (+29% and +5%) and New Zealand (+21% and +8%), the firm added.
Global insolvencies
In terms of global insolvencies, they are also set to ump by +6% in 2023 and +10% in 2024 after a small rebound in 2022 (+1%), the trade credit insurer noted.
These are against the back drop of recession in corporate revenues gaining traction amid lower pricing power and weaker global demand, Allianz Trade pointed out.
As of Q2 2023, the revenue recession has been broad-based across all regions for the first time since mid-2020 (-1.9% y/y), the firm said.
This combined with continued high costs is squeezing profitability, the firm added.
As a result, liquidity positions are worsening fast and not likely to improve before 2025, Allianz Trade observed.
