As short-term economic-relief packages expire globally, mounting insolvencies are projected this year. But hope springs eternal for the prepared mind.
With economies around the world experiencing historic levels of economic strife, insolvencies are mounting everywhere. Hong Kong is expected to be one of the most affected markets across the globe, according to forecasts by credit insurance firm Atradius.
The increases are primarily driven by the impact the Covid-19 on global economies. Every major economy, except for China, is expected to enter recession this year. The extent of recession in each economy will be determined by the ability to manage health regulations and either exit lockdowns or thrive in social distancing, according to the firm.
Encouragingly, technology can be used to help economies address the challenges of healthcare readiness, social distancing regulations and the new digital-only business landscape, as DigiconAsia’s reports have shown. Digital transformation drives are in full swing globally, and opportunities continue to present themselves to any organization that is ready and able to recognize and grab them.
Short-term relief is expiring
Said Atradius’ Chief Economist John Lorié: “Government measures have reduced the anticipated increase in bankruptcy filings in a range of ways. They have either shifted the threshold for filing, reduced debtors’ ability to force bankruptcy, or provided sufficient financial support to delay filings. However, as the support programs begin to expire, the number of filings should climb rapidly.”
Among Asian economies, Atradius forecasts to rise 39% economy insolvencies in Hong Kong, behind just Turkey and the United States in the global ranking. The Chinese city’s economy is in a deep recession and there has been little or no suspension of insolvency proceedings. However, its government has implemented a sizable fiscal stimulus program that has helped to dampen the number of insolvencies. Elsewhere in the region, Japan, Singapore and South Korea will experience a considerable growth in insolvencies during 2020 but may see a significant decrease in 2021.
Bart Poublon, Head of Risk for Atradius APAC said: “The pandemic has put downward pressure on Asia’s export-driven economies as global supply chains come under pressure and demand wanes. However, as one of the first regions to reopen, Asia is well-positioned to benefit from the rebound in economic activity, which will lead to falling rates of insolvency in 2021.”