Recent Global Insolvency and Economic Trends

At the start of the pandemic, insolvency filings were expected to increase by 35% in 2020 and 2021. While some industries were hit hard, this prediction never materialized in Canada and the U.S., possibly because of significant financial government support. The future is less clear, with Allianz Research forecasting, for 2022, a 15% increase in insolvency filings and a 5.5–6% decrease in global economic growth.

Below are five key trends that may impact insolvencies this year, based on data published by the World Bank:

1. Global Debt. Going into the pandemic, it was estimated that both public and private global debt levels were at about US$200-trillion. That number has now climbed to 265% of the global domestic product. The pace of recovery in advanced economies appears to be stronger than in emerging markets.

2. Global Inflation. As of October 2021, the median rate of global inflation was 4.6%. That was up by 1.5% from May 2021. In Canada, inflation was at 4.8% in December 2021. While there is hope that inflation will subside this year, there is no guarantee. Demand continues to grow, supply is constrained, and costs are on the rise, painting a less-than-welcome picture.

3. Insolvency Reform. In 2021, the World Bank and INSOL International surveyed 75 countries. Seventy-one had enacted some type of insolvency reform early on in the pandemic in 2020. More than half of these countries enacted a reform meant to delay insolvency filings. In addition, 25–35% had limited access to the courts for financial disputes. Overall, there were more insolvency reforms in the last three quarters of 2020 than in the previous three years, collectively.

4. Impact on Women. Women have been disproportionately impacted by the pandemic. Jobs that women tend to perform were about twice as vulnerable to the crisis than men’s jobs. Women make up 40% of the global workforce but accounted for 50% of the job losses. Businesses that women own were less likely to access government support programs and much more likely to see decreases in sales.

5. Global Working Hours. To date, about 10% of global working hours (250-million full-time jobs) were lost during the pandemic, disproportionately affecting young people. Based on a Business Pulse Survey conducted in 80 countries, half of microenterprises surveyed expected to be in arrears over the next six months compared to one-third of large enterprises, and approximately 85% of microenterprises reported lower monthly sales over the last 12 months compared to pre-pandemic times.

Have more than five minutes? Contact any member of our Restructuring & Insolvency group to learn more, or view our recent webinar for more on these and other trends.