Central and Eastern Europe: Less business insolvencies despite temporary headwinds in the construction sector

Central and Eastern Europe: Less business insolvencies despite temporary headwinds in the construction sector

Despite some slowdown last year, average GDP growth remained at a solid level  of 2.9% in Central and Eastern Europe. Economies have been benefi ting from the  favourable situation on the labour market, with contracting unemployment rates  and rising wages. The improving macroeconomic environment has had positive  effects on business. Company insolvencies dropped by 14% in 2015 and a further  6% in 2016. Over the course of last year, 6 entities per 1,000 became insolvent. The regional  breakdown reveals a wide variety of dynamics, ranging from a fall of 35.6% in proceedings in  Bulgaria, through to a minor increase of 2.6% in Poland and a surge of 56.9% in Hungary. Regionwide  however, the downturn in construction activities led to companies within this sector being  widely represented in insolvency statistics. Construction consequently took fi rst place in the  ranking of fl op sectors in the CEE region.  

Coface forecasts that company insolvencies in the CEE region will decrease by 3.9% in 2017  and by 2.3% in 2018. The acceleration in GDP growth and the rebound in investment activity  bring further positive signals for businesses. A new fl ow of infrastructural projects, stable  contributions from household consumption and the exploration of foreign markets will all be  economic supporters. Nevertheless, businesses could experience some challenges, subject to  the whims of the global economy and political uncertainties. The latter include the eventual  negative consequences of Brexit and uncertainties in Western Europe, with unclear election  results in Italy. In addition, there have been local political issues, as seen in the Czech Republic,  Poland and Romania. The rebound in investments should be particularly benefi cial for sectors  such as construction, transport and the manufacturing of machinery, construction equipment  and construction materials. Nevertheless, labour shortages will remain an obstacle for many  expanding businesses.

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