A study of a company affiliated with the insurance giant "Allianz" revealed that the world is living in a state of tranquility that precedes the storm of declaring bankruptcy of companies across the world due to the repercussions of the pandemic of the emerging Corona Virus virus. From next year.
The company said in the study that the Corona virus pandemic generated a time bomb from financial hardship, anticipating a 35% increase in the number of companies that will declare bankruptcy between 2019 and 2021, and indicated that half of the countries of the world will record unprecedented bankruptcy levels since the global financial crisis of 2009.
According to the study, the largest rates of increase in bankruptcy in the major economies will be recorded in the United States, with the financial default in 2021 increasing by 57% compared to the level recorded in 2019, before the outbreak of the emerging Corona virus.
The number of bankruptcies will increase by 45% in Brazil, 43% in Britain, 42% in the Netherlands, 41% in Spain and 40% in China.
Lower rates,
while increase rates will be lower in other advanced and emerging countries such as Greece 33%, Turkey 31%, Finland 29% and Italy 27%, and advanced countries will register a much lower percentage than before, such as South Korea 6%, India 9%, Australia 11% and Germany 12% .
Among the countries surveyed is Morocco, which is the only Arab country included in the study, as it is expected that the increase in the bankruptcy of Moroccan companies between 2019 and 2021 will reach 25%, the same percentage for France and Canada.
The Euler Ermis company study warned that the rates of increasing corporate bankruptcy may be greater depending on two factors, namely the early cessation of support measures set by the countries of the world, and the global economy taking longer than expected to overcome the shock of the Corona crisis.
If the countries of the world stop support measures to meet the corona’s repercussions early, the rate of increase in bankruptcy will rise to between 40% and 45% on average, and if the global economy needs longer than expected to recover from the virus crisis, the bankruptcy rates will increase to between 85% and 95% .
"# International Cash" warns: The bankruptcy of SMEs may triple 3 times https://t.co/08Hax9S2FE # The International Monetary Fund # Economy # Protect you pic.twitter.com/VGPg6ZcqkQ
- Hamak Kuwaiti newspaper (@hmakorg) July 16, 2020
The effect of domino
The study states that bankruptcy of companies has wider repercussions than what falls on the affected party itself, as it deprives other companies of charging their dues, or forces them to search for other sources of financing, often they have suppliers who impose higher prices.
The study warns that "the larger the size of a company that is declared bankrupt, the greater the risk of serial bankruptcies such as what happens in a domino game." The study adds that the United States, the world's largest economy, is particularly vulnerable to this risk.