Coface: 38.6% more cases of company insolvency in the CEE region last year – this indicator has fallen in Latvia – Economy, finance

In 2023, the number of corporate insolvencies in Central and Eastern European (CEE) countries increased by 38.6%. From the 12 countries of the CEE region, insolvency has increased in nine countries, and in only three, including Latvia, the number of such cases has decreased, according to the data compiled by the global risk management company Coface. In Latvia last year, the number of company insolvency cases, compared to the situation in 2022, decreased by 3.9%, in Lithuania it increased by 1.8%, and in Estonia even by 14.4%. Economists warn that a significant economic improvement in the business environment is not yet expected, and economic indicators in the region this year could be worse than initially predicted.

Last year, an increase in the number of company insolvency cases was registered in the Czech Republic (+4.9%), Estonia (+14.4%), Hungary (+152.5%), Lithuania (+1.8%), Poland (+70.8%) ), Serbia (+6.7%), Slovakia (+15.3%), Slovenia (+1.0%) and Romania (0.0%), while the decrease was registered in three countries – Latvia (-3.9%) ), Bulgaria (-10.5%) and Croatia (-18.8%).

Analyzing the changes and trends in the total number of insolvency cases in the Baltic States, Coface economists cite indebtedness, excessive risk-taking and lack of working capital as the main reasons for corporate bankruptcy. Most of the bankrupt companies in the Baltics in 2023 operated in the wholesale and retail trade, car and motorcycle trade and repair, as well as construction sectors. Most of the registered insolvency cases were registered for companies that were already in financial difficulties before the onset of the pandemic.

“The increase in total bankruptcies in CEE countries was generally driven by a combination of internal and external factors, including geopolitical tensions and inflationary pressures, which put companies in troubled waters. In many cases, the onset of corporate insolvencies was delayed by government support measures for companies during the pandemic, and this is the reason for many corporate insolvencies. a unifying factor in the entire CEE region. As for the Baltic States, an improvement in economic activity can be predicted in 2024, and household consumption will become more and more prominent this year as a growth-promoting factor,” the trends are clear Coface Chief Economist in the Central and Eastern Europe (CEE) region Grzegoz Silewicz (Grzegorz Sielewicz).

The overall economic downturn has caused the region’s average GDP growth to fall from 4.0% in 2022 to just 0.5% in 2023, the lowest performer this century, excluding the global financial crisis of 2009 and the Covid-19 pandemic in 2020. year. Similarly, negative economic growth indicators were registered in the Czech Republic, Estonia, Hungary, Latvia and Lithuania last year.

The fallout from Russia’s invasion of Ukraine, not least because of its geographic proximity, reverberated across the region, disrupting supply chains and driving up energy prices. These external shocks, coupled with internal problems such as labor shortages and rising raw material costs, have had a negative impact on the business environment and led to a significant increase in insolvencies, according to Coface economists. As shown by the analysis of the number of insolvency cases by different sectors, the construction and trade sector was in a particularly bad situation last year, which felt the lack of labor force, the pressure to raise wages and the decrease in demand.

Coface forecasts show that an increase in the number of insolvency cases in the countries of the CEE region is also expected in 2024, however, this increase will not be as rapid as last year. The business environment in 2024 will be characterized by limited turnover growth, a decrease in profits and challenges for export companies due to weak external demand indicators, especially from Germany. However, there are signs that the economy is strengthening, driven by consumer-driven demand for a variety of goods and services, especially for daily necessities. The challenge for companies in 2024 will continue to be the rising prices of goods and raw materials, as well as labor costs, including in connection with the increase of the minimum wage in a number of CEE countries.

reviti.lv