COVID-19: heading towards a sudden global surge in corporate insolvencies

In this context, the question is no longer about the countries and sectors of activity that will be aff ected by this shock, but rather the (rare) ones that will be spared. For instance, the pharmaceutical sector and, to a lesser extent, the food industry are among these relatively spared sectors. In 2020,
the world economy should experience its fi rst recession since 2009 (-1.3% after +2.5% in 2019) and 68 countries are expected to be in recession this year against only 11 last year. The volume of international trade will drop for the 2nd consecutive year (world trade down by 4.3% this year in volume, after -0.4% in 2019), the credit risk of companies will be rise sharply and Coface forecasts that corporate insolvencies will increase by 25% worldwide (compared to only +2% expected last January). It would be, by far, the strongest increase since 2009 (+29%), even if economic activity gradually restarts in the 3rd quarter, and without the occurrence of a second wave of epidemic in the second half of the year. This trend would aff ect the United States (+39%) and all the main Western European economies (+18%): Germany (+11%), France (+15%), United Kingdom (+33%), Italy (+18%) and Spain (+22%). The shock could be even more violent in emerging economies: in addition to the pandemic, which might be more difficult for them to manage, they are also facing the fall in oil prices, as well as capital outflows that have quadrupled compared to their 2008 level. Finally, the pandemic should also have many political consequences, the most obvious being that it exacerbates existing geopolitical tensions in the short term.