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Watch out! Currencies hit new lows and many countries face a surge in corporate bankruptcies
Published:
2023-06-12
Watch out! Currencies hit new lows and many countries face a surge in corporate bankruptcies
Under the influence of weak economic recovery, sovereign debt risks and high inflation, the downside risks of the global economy have increased sharply.
01, the number of multinational bankruptcies soared 200,000 companies went bankrupt in Europe
Recently, according to the German credit agency "credit Reform" (Creditreform) released the latest report shows that the number of companies filing for bankruptcy in Europe is increasing.
The report shows that in 2022, nearly 140,000 companies went bankrupt in 14 Western European EU countries, as well as Norway, Switzerland and the United Kingdom. This is an increase of 24.2% compared to the previous year. The biggest increase in the number of companies going bankrupt was in Austria, where it rose 59.7 per cent from the previous year. This was followed by the United Kingdom (55.9%), France (50%) and Belgium (41.7%).
In Eastern European EU countries, the number of corporate insolvencies increased by 53.5% year-on-year to more than 60,000, for a total of nearly 200,000 in eastern and Western Europe combined.
Individual sectors were particularly hard hit: retail and hospitality led by a 34.5% increase in insolvencies, followed by construction (24.7%), services (20%) and manufacturing (13.1%).
Two years into the pandemic, the number of companies going bankrupt was correspondingly lower, DPA said, because many EU countries protected companies from bankruptcy through subsidies during the pandemic. Now, that phase is over.
Gerhard Weinhofer, Managing Director of Credit Reform Austria, believes that "the development of insolvency can also be described as a normal and necessary development". Mr. Hanch predicted that the number of bankruptcies would continue to rise in the coming months.
According to the Washington Post and The Capitol Hill on May 23, a new report shows that the number of US companies filing for bankruptcy has continued to increase this year, with more than 230 as of April.
Us media said that with the increasing economic pressure, if the US debt default cannot be avoided, the situation of US corporate bankruptcy will certainly continue to worsen.
According to S&P Global Market Intelligence, 236 major U.S. companies filed for bankruptcy in the first four months of this year, more than double the number for 2022 and the highest for the same period since 2010.
The hardest hit are companies that sell products directly to consumers, followed by industrial companies and then financial services companies. In recent weeks, several large and well-known companies with hundreds or thousands of employees have even filed for bankruptcy protection.
Mark Zandi, chief economist at Moody's Analytics, said bankruptcies were on the rise in the United States as interest rates rose and the government's coronavirus support program for companies largely ended. "If a default is unavoidable, it will obviously exacerbate the problem," he said.
Zandi also said that even a short-term failure to pay the government's debt would push the U.S. economy into recession, while a long-term default would be "catastrophic" and would trigger a "tsunami of bankruptcies."
02 Currency fluctuation risk
At the same time, the currencies of most emerging economies tend to suffer from the double whammy of high inflation and a rising dollar.
India's "demonetisation order" has spawned a wave of large cash shopping
Recently, according to Reuters, the Central Bank of India announced on May 19 that the largest denomination note in circulation, 2,000 rupees (about 170 yuan), will be withdrawn from circulation at the end of September, India has risen a large cash shopping craze.
Analysts believe that on the one hand, some people do not want to take the time to queue up at the bank to change their 2,000 rupee notes into small denomination notes, and on the other hand, some people worry that they will be targeted by the tax authorities if they suddenly deposit large amounts of cash.
In recent days, from small fruit stalls selling mangoes to high-end stores selling expensive watches, many retailers have seen an increase in the number of customers buying with large banknotes of 2,000 rupees.
A mango stall owner said that since the demonetisation was announced, his stall has received eight to 10 large 2,000 rupee notes a day. A manager of a business selling Swiss radar watches in downtown Mumbai said the amount of 2,000 rupees in cash received in the store in recent days has increased by 60 to 70 percent from the past.
Some stores are happy with the increase in sales as people rush to buy with large cash bills. However, some merchants said it would be too troublesome to deposit cash before the end of September.
Prior to the "demonetization order" in 2016, I believe that many Chinese companies in India still remember that the road to the bank to exchange notes was clogged, and various certificates had to be issued in the bank to exchange notes.
This "demonetisation order" may cause difficulties for small and medium-sized enterprises and self-employed people in India. We also ask Indian and Chinese enterprises to make adequate preparations.
Argentinean inflation rate of more than 100% inflation of the denomination of 2000 banknotes officially launched
On May 22, local time, the Central Bank of Argentina announced that from the same day, the country's new version of the largest denomination of 2,000 pesos banknotes officially began circulation.
According to a communique issued by the central bank of Argentina, the main purpose of using the new denomination notes is to deal with the inconvenience caused by the high inflation in the country to the circulation and use of Argentine peso cash.
According to Argentina's official economic data released on May 12, the country's inflation rate reached 8.4% in April this year. The cumulative inflation rate over the past 12 months rose to 108.8%, the highest level since 1991. The peso has depreciated by more than 23 per cent this year.
With prices rising fast, saving money can mean paying more for the same goods months or even weeks from now, and "stocking up" ahead of time can save you a lot of money.
In addition to trying to buy as much as the family needs in the near future, many Argentines also stock up on some items that are not easy to expire, such as toilet paper and canned food. In addition to their own use, these items that can be stored for a long time can also be sold to friends and colleagues after the price increase to earn the difference.
In addition, prices are rising so fast that some Argentines run out of cash before the end of the month, even unable to afford the necessities of life, so some people spontaneously organized "barter clubs", such as clothes, shoes and other idle goods in exchange for milk, bread and toothpaste and other necessities, in the case of cash shortage temporarily tide over the difficulties.
Bangladesh's foreign exchange reserves fell by $1.16 billion to $31.14 billion as of March 9, 2023, after settling import bills of more than $1 billion with trading partner countries on Tuesday, latest central bank data showed.
If monthly imports remain in the $6 billion range, the current reserves could cover nearly five months of the country's imports. However, if other loan repayments are taken into account, the reserve coverage ratio will fall.
Bangladesh has cut its monthly import bill to $5 billion in January, compared with more than $7 billion before September last year, according to central bank data.
The number of new letters of credit opened fell to $4.9 billion in January, suggesting that foreign exchange payments will continue to fall in the coming months when the letter of credit settlement period arrives.
In view of the trade disputes in Bangladesh, the high risk of letters of credit, and the lack of bank credit ratings, it is recommended that domestic trading companies carefully choose trading partners and issuing banks, and purchase relevant foreign trade insurance.
The Economic and Commercial Counselor's Office of our Embassy in Bangladesh has twice issued the "Annual Bangladesh Commercial Bank Complaints Statistics Table", which includes the complaints against Bangladesh commercial banks in 2021. Please do foreign trade personnel in the Bangladesh market must collect, and remember to avoid the issuing bank on the "blacklist".
The country suddenly: a large area of power outage, or continue for two weeks! Lack of fuel, the development of the industry suffered a setback!
The Turkish lira plunged more than 7% to record lows
On June 7, local time, the Turkish lira plunged 7%, the biggest drop since the Turkish currency crisis in December 2021. The lira has fallen more than 60% against the dollar in the past two years. After Wednesday's plunge, the dollar was worth about 23 lira. The main reason for the fall is that Turkey is making a difficult turn in monetary policy. Finance Minister Mehmet Simsek, who took office earlier this month, said Turkey would reverse years of selling foreign currency reserves to prop up the lira and try to establish fiscal discipline and curb inflation.
The devaluation is further hurting Turkey's weak economy, but if austerity does persist, it could curb Turkey's high inflation.
Turkey's most recent inflation rate was 39.59 percent in May, according to government data. In October, Turkey's inflation soared to a high of 85.51 per cent.
The devaluation of the currency makes it more expensive for Turkey to import goods such as medicines and crude oil. It could also push businesses and households that borrow in dollars into bankruptcy.
Trade risk warning: Foreign traders who have related business dealings with the above countries should pay attention to the control of trade risks (especially receipt and payment), and beware of the risk of abandoning goods and refusing to pay at the destination port.
Trade related businesses and individuals pay attention to the latest changes!
Sources: Collated from Wall Street, CCTV News, Zhejiang Trade Promotion, etc
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