Jun 29, 2012
Economist warns that global corporate insolvencies could riseBack
Bankia|Euler Hermes|Asia|Europe|Spain|United Kingdom|United States|Credit Insurance|Luke Doig
© Reuse this
The ongoing deterioration in the economic outlook for Europe has impelled European credit insurance company Euler Hermes to revise its 2012 outlook for global corporate insolvencies from an earlier expectation of a 5% fall to a 3% rise.
Of concern, says insurer Credit Guarantee senior economist Luke Doig, is that global company closures remain at elevated levels following the 64% cumulative rise seen in 2008 and 2009, when bankrupt- cies in the US rose accumulatively by 210% from 2007 to 2009, and those in the eurozone by 90% between 2008 and 2009. Only Asia remained relatively unscathed.
“I am uneasy about the outlook for the European economy this year and potentially into 2013 as well as the resultant impact on corporate health, implying rising payment defaults and global insolvencies,” Doig notes.
Banks are currently under pressure to restore strength to their balance sheets, and growth forecasts are being trimmed across the globe as rising unemployment, poor sentiment and weak demand dampen positive forecasting, with a further pick-up in company closures next year potentially pushing the insolvency index close to record highs.
Doig adds that the challenge for South African exporters is to select specific markets and sectors to ensure a better chance of being paid.
“Moreover, shipping on open terms, given such uncertainty, is foolhardy, especially when one considers the poten- tial contagion for bank failures. Payment protection amid this volatility is para- mount,” he warns.
Meanwhile, Doig says that a systemic break-up of the eurozone cannot be excluded while Spanish banks are scrambling to recapitalise themselves as their borrowing costs soar. With the exception of the nationalisation of Spain’s fourth- largest bank, Bankia, three savings banks, namely Ibercaja, Liberbank and Caja3, are said to be considering a possible merger, which would create Spain’s seventh-biggest lender.
He adds that an additional contributor to the European economic unease is the economic downturn currently experienced in the UK, where retail bankruptcies have recently been reported to have increased by 38% in the first quarter of 2012, compared with the first quarter of 2011.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other News This Week News
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
This Week's Magazine
The international Square Kilometre Array (SKA) radio telescope – which is to be jointly hosted by South Africa and Australia with, later, outstations in other countries – may not yet exist, but international scientific working groups are already deciding what...
A free Web-based solar power plant capacity-planning tool offers project planners and developers, as well as governments, a means to assess the solar energy potential of thin-film solar PV power over an area of land. The tool was developed by thin-film solar...
As yet, no specific methodology, timeline or costs have been finalised to remedy the water ingress, excessive to contractual specifications, into the Gautrain tunnel between emergency shaft two (E2) and Park Station, says Bombela Concession Company technical and...
The “seriously disruptive” electricity outages in South Africa have cost packaging group Astrapak more than R2-million in “irrecoverable downtime costs”, the company said on Monday, adding that the power cuts were negating some of the benefit of energy saving...
Bakkies and more affordable cars dominated South Africa’s new vehicle market in 2014. Unaudited data from the Department of Trade and Industry (DTI) shows that South Africa’s most popular vehicle in 2014 was the Toyota Hilux, selling 37 562 units.