The General Council of Economists warns of the high risk of a large number of bankruptcies this year and next due to the end of the moratorium and the economic slowdown
Corporate insolvencies will increase by 20% this year in Spain (double what is expected globally) and 11% in 2023, according to forecasts from the General Council of Economists. The Spanish economy faces the challenge of managing a “growth slowdown” and an increase in bankruptcies as the period for repaying the loans guaranteed by the ICO begins:
The president of the General Council of Economists, Valentín Pich, pointed out that the bankruptcy data for 2020, 2021 and 2022 are “determined by the effects of the covid and the measures that have been applied”, in particular the bankruptcy moratorium that the state has put in place until June 2022 “served to contain the expected rise in bankruptcies”. After the suspension of payments ended, the number of bankruptcies pronounced after the summer increased by 30%. In 2023, the number of bankruptcy proceedings should continue to grow, but at a slower rate, as other instruments provided for in the Bankruptcy Reform Act come into play, such as restructuring plans to try to get companies back on their feet and avoid going into liquidation.
On Monday, the economists presented the Bankruptcy Atlas 2022, prepared by the Registry of Forensic Economists (REFOR), a body specialized in insolvency cases. REFOR’s Vice President, Miguel Romero, explained that “in 2021, the increase in the number of self-employed competitions has been particularly noteworthy, which has almost tripled.” This sector registers the biggest increase in trying to get a second chance.
According to the Atlas, business insolvencies in 2021 increased by 52% compared to 2020, from 4,630 to 7,062; The number of insolvencies among the self-employed, micro-SMEs and small businesses grew by 44% (they rose from 4,034 in 2020 to 5,483 in 2021). By sector, competition has grown the most in trade, business services, hospitality, construction, energy and industry.
However, Spain is the second country in Europe with the lowest bankruptcy rate: only 13 companies out of 10,000 file for bankruptcy, while the European average is 47 per 10,000.
From 2018 to 2021, the number of cases involving natural persons multiplied by 2.5 may be due, according to REFOR, to the fact that they were the most vulnerable to the economic crisis caused by the pandemic and to the ruling of the July 2019 Supreme Court has allowed it a greater exemption from the public credit at second opportunity.
In terms of the territorial distribution of insolvencies, all autonomous regions showed an increase in insolvencies in 2021 compared to 2020 despite the 2021 insolvency moratorium, except La Rioja.
The autonomous communities of Catalonia, Madrid, Valencia and Andalusia, with 5,234 bankruptcies in 2021, will concentrate almost 74% of the total company bankruptcy proceedings, 7,062. Specifically, Catalonia will go from 1,253 bankruptcies in 2020 to 2,446 in 2021, and the Community of Madrid from 859 in 2020 to 1,259 in 2021. Catalonia is clearly the community experiencing the greatest growth in 2021. In 2021, 0.21% of Spanish companies filed for bankruptcy (one in 476 companies), in Catalonia this rate was 0.39%, the highest, followed by the Valencian Community (0.25%), the Basque Country and Asturias ( by 0.24%). %) and Madrid (0.23%).
According to the report, the underground bankruptcy economy continues, although it is decreasing: the payments of Fogasa (wage guarantee fund) from January to December 2021 increased by about 14.31%, and the ratio comparing them to the number of creditor bankruptcies (1.15) decreased by 14% compared to 2020; Therefore, the underground bankruptcy economy persists, although it is declining. The ratio of 1.15 would show that there should be at least 15% more bankruptcy proceedings since there are more Fogasa payments, arising from insolvencies, than bankruptcy proceedings. This indicates that in Spain, many companies do not go bankrupt to solve their financial crises, but opt for simple closure and thereby increase the underground bankruptcy economy.
Another data that the CGE has highlighted is the upward trend of express procurement in the third quarter of 2022: it goes from -1.5% in the first quarter to 0% in the second and 69% in the third. indicates that the bankruptcy situation is not positive, since these companies, having no mass, go directly into liquidation.
According to economists, in the case of Spain, there is a trend towards an increase in bankruptcies compared to other countries (Germany, France, Italy, the United Kingdom and Portugal) where they have decreased from 2021 to 2019. Among other factors According to the CGE, this may be due to an increase in effective aid that should have reached these countries in 2021 and the associated moratoria in those countries as well. Overall, economists are forecasting an increase in insolvencies in 2022 and 2023 in most countries in the world, including Spain, after the unusually low levels during the pandemic.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
