2022 does not look easy due to the risk of insolvency. According to the latest Atradius barometer, over the past year B2B payments have risen to 53% (from 47%) and cancellations have increased to 10% (from 7%). In 2022, global insolvencies are projected to increase by 33% with the phasing out of fiscal support.
Atradius' prediction is defined by three forces.
First, there is a delayed effect of bankruptcies that under normal circumstances (no tax package, no bankruptcy moratorium) would have occurred in 2020. A portion of the businesses that have been "bailed out" will face insolvency in the first twelve months. after the expiry of the tax support.
The second force is the phasing out of fiscal support itself, which will generally trigger an increase in delinquencies to "normal" levels, similar to those seen in the pre-pandemic period. In about half of the markets surveyed by Atradius, fiscal support ceased as early as the first half of 2021 or even earlier (for example in Brazil, Russia and Turkey). For the other half, the stimulus will be phased out in the second half of 2021, or even later (in Australia, Ireland, Japan, Spain and Sweden, support will continue until the fourth quarter of 2021).
The third factor shaping the default forecast is the effect of economic developments, which depends on two factors: the gap between GDP and potential GDP (strength of the recovery), and how reactive defaults are to this GDP gap. This factor captures how delinquencies respond to the business cycle. Based on historical relationships, delinquencies generally decrease in expansive business cycles and increase when growth slows or even declines. Responsiveness is called "resilience" in economics and measures the degree to which delinquencies change in response to changes in GDP.
Looking at the country-level forecasts, bankruptcies will be the highest in Italy (+ 34%), UK (+ 33%) and Australia (+ 33%) compared to pre-pandemic levels. In Australia, the increase will mainly occur in 2022 due to the expiry of the fiscal support towards the end of this year. In Italy and the UK, the increase is spread across both 2021 and 2022, but the biggest increase will occur in 2022. Other large economies such as Spain (+ 26%) and France (+ 23%) can also expect high levels of insolvency in the next year. Some countries show a relatively stable development of insolvencies until 2022. Examples are Germany (+ 2%), and to a lesser extent also Sweden (+ 3%) and Japan (+ 4%), markets where the delinquencies will return more or less to normal, despite the pandemic. Brazil (-35%), South Korea (-15%) and Ireland (-10%) are the only markets with substantially lower defaults in 2022 compared to 2019 levels. In Ireland, defaults have not declined as sharply in 2020 , and therefore the base effect is less. Furthermore, fiscal support is continuing through the fourth quarter of 2021, while the strength of the economic recovery is also reducing delinquencies. In South Korea, the long extension of fiscal support is also the reason behind the still low level of defaults expected in 2022. In Brazil, the economic recovery is strong enough to keep defaults at their current low level over the next two years.
The critical outlook, according to Atradius, is having the positive side effect of increasing the search for credit insurance solutions. This year, more than half (53%) of European companies have purchased a policy to protect trade credit. The greatest diffusion was recorded among large companies and in the production sector.
