Vienna (OTS) – Vienna, May 8, 2024 – As a result of the economic downturn, there was an increased increase in corporate insolvencies in Central and Eastern European countries in 2023. “The companies survived the pandemic thanks to comprehensive government support programs. However, the expiration of the measures, combined with macroeconomic pressures, drove insolvency rates to new highs.”
explains Dagmar Koch, Country Manager Coface Austria, drawing a parallel to Austria: “We are currently recording a record high number of bankruptcies, particularly affecting the construction industry. In the first quarter of 2024 there was an increase of 24 percent compared to the previous year.”
The economic downturn led to a decline in average GDP growth in the CEE region from 4.0 percent in 2022 to just 0.5 percent in 2023. “After the financial crisis and the pandemic, this is the lowest growth rate in this century”
, emphasizes Koch. The Czech Republic, Estonia, Hungary, Latvia and Lithuania even recorded negative growth rates in 2023.
The increase in insolvency proceedings reflects weak economic growth. The CEE region recorded a 38.6 percent increase in insolvency proceedings from 2022 to 2023, marking another year of double-digit growth. “This development is due to a combination of internal and external factors that have exacerbated the situation for companies in the CEE region. Geopolitical tensions and inflationary pressure in particular have put companies in troubled waters.”
explains Koch.
Construction and trade severely affected
The consequences of the Russian invasion of Ukraine were felt throughout the region, not least due to its geographical proximity. They led to a disruption in supply chains and a rise in energy prices. These external shocks, combined with internal challenges such as labor shortages and escalating input costs, have placed a heavy burden on companies and led to a significant increase in bankruptcies. The construction and retail industries were particularly affected by the wave of insolvencies and had to contend with a labor shortage, wage pressure and declining demand.
Rocky road to recovery
“We expect a further increase in insolvencies in 2024 – albeit at a lower rate than in the previous year. “Companies continue to be unable to exploit their full economic growth potential due to the many global and local challenges.”
, explains Jarosław Jaworski, CEO of Coface in the Central and Eastern Europe region. The business environment in 2024 will be characterized by limited sales growth, declining margins and ongoing challenges for exporters due to sluggish external demand. Demand from Germany, which remains the most important trading partner for the majority of CEE economies, is lacking. “However, there are signs of a consumption-driven upswing, particularly in everyday goods, which is supporting economic activity in Central and Eastern Europe.”
emphasizes Jaworski and adds: “Nevertheless, companies face increasing pressure from rising raw material prices and labor costs, including increases in minimum wages.”
COFACE: FOR TRADE
With 75 years of experience and the densest international network, Coface is a major credit insurer, partner in corporate risk management and in the global economy. With the aim of becoming the most agile credit insurer in the world, Coface supports 50,000 customers in building and dynamically developing businesses. The products and services protect companies in national and international business and help them make credit decisions. In 2022, Coface was active in 100 countries with around 4,720 employees and achieved sales of approximately 1.81 billion euros.
For more exciting publications, visit our website.
Questions & Contact:
MEDIA CONTACT
COFACE
Carina KISS: +43/1/515 54-510 – carina.kiss@coface.com