The global economy is set for a change of pace this year, according to a new insolvency forecast from credit insurer Atradius. 2018 will be the ninth straight year of insolvency declines at 3%. This is due in part to economic growth and low interest rates, but “downside risks are rising as the period of easy money is coming to an end, especially in the [United States].”
The U.S. economy is poised for a nearly 3% increase this year, according to Atradius, and corporate bankruptcies dropped 4% in 2017. Business confidence has been spurred by the recent tax reform and regulatory rollbacks. This will “stimulate higher corporate investment and business activity, which in turn should further lower insolvencies.”
However, there are still risks to this prediction, which include tightening trade policies. Despite the positive outlook, there are a few industries that are dealing with heightened insolvencies. Bankruptcy filings increased in the oil and gas sector, and insolvencies reached a six-year high in the retail industry. The latter is potentially due to consumers migrating to online shopping.
Of the countries surveyed by Atradius, Greece showed the best outlook at -12%, while the United Kingdom was the only country to have its insolvency outlook increase at 4%.
-Michael Miller, managing editor