Page 30 - bne IntelliNews monthly magazine October 2024

30 I Cover story bne October 2024
which are going up the value chain. Germany invented commercial solar panels and was home to a vibrant automotive sector. Both are now in trouble as they are overtaken by Chinese producers. Germany’s solar panel business is now a wasteland after the government decided not to bail it out with subsidies, conceding defeat in the face of an unwinnable fight against higher Chinese quality and lower prices. As previously mentioned, China has become a manufacturing powerhouse and beats Germany not only on the technology
of the panels themselves, but also with superior solar panel manufacturing technology to make them.
The double whammy of higher costs at home and increased competition abroad has put the export-orientated Germany SMEs in the front line. Many of them work in light manufacturing, whereas elsewhere in Europe SMEs are dominated by services. In 2021, the average number of bankruptcies in Germany was 1,000 per month. In 2024, this figure is approaching 2,000 per month.
The number of major bankruptcies in Germany also grew by 41% year to date. Household names that were set up over hundred years ago have gone bust in the first half of this year. Amongst the collapses were paper manufacturer ISHPaper, founded in 1828; shipyard Meyer Werft, founded in 1795; the butcher’s chain Holzapfel Thüringer, founded in 1827; and the brewery Brauerei Bruch, founded in 1702, to name a few.
The story is the same in France, the
UK and US. American bankruptcy filings surged over the past three years, reaching a 13-year peak in 2023. High inflation, high interest rates and the after-effects of the COVID-19 pandemic have contributed to this trend. The healthcare, consumer discretionary and industrial sectors were among the hardest hit. The number of corporate bankruptcies in France has surpassed the record set after the 2008 financial crisis. And the UK currently has the highest number of bankruptcies in 30 years after 25,158 registered companies became insolvent in 2023, Bloomberg reports.
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All the main European economic sentiment indicators are falling, according to Oxford Economics. “The September decline in the ZEW Index provided another gloomy signal for
the eurozone's near-term outlook. The drop was particularly large in Germany, where the assessment shows current conditions are now close to the lows of the pandemic,” Oxford Economics said in a note in September.
The same goes for Emerging Europe, where the EBRD just downgraded
its economic forecast for the entire region. In the latest Regional Economic Prospects report released on September 26, the EBRD projects growth of 2.8% for 2024, a slight reduction from its previous estimate of 3.0% in May 2024. The forecast for 2025 has also been revised downward by 0.1 of a percentage point to 3.5%. EBRD chief economist Beata Javorcik warned that "ongoing vigilance will be required as economies adapt to challenges related to renewed inflationary pressures, energy security, trade and financing conditions".
Even Russia is not getting off scot-free. Due to the exceptionally high key rate (19%), with which the Central Bank
is trying to combat inflation, Russian companies are finding it increasingly difficult to service loans, according
to a recent report by the Centre for Macroeconomic Analysis and Forecasting (CMAF). After unexpected strong growth
Eurozone: Key surveys
over the last two years thanks to the
war spending bump, Russia’s economy
is cooling as the military Keynesianism boost starts to wear off. The Central Bank of Russia (CBR) issued a pessimistic medium-term macroeconomic outlook at the start of August that predicts growth and consumption will slow dramatically starting in 2025.
On average, every fourth ruble of profit in the manufacturing industry goes
to pay interest, analysts calculated. In 2023, the profit of Russian companies grew by 35%. But in the first quarter of 2024, compared to the same period last year, the figure fell by almost 4%.
But Russian companies are not going bust. In 2021, corporate bankruptcies in Russia increased modestly, up
3.9% from 2020, as part of a post- pandemic bounce back. In 2022 and 2023 there was a sharp decline in corporate bankruptcies, primarily due to government interventions such as a moratorium on insolvencies for key industries. By 2023 the number of company bankruptcies had dropped even further, by nearly 30% year on year, as the war boom got under way. Russia’s economy still has a lot of leeway, despite the global slowdown, thanks to good management and lots of cash in reserve.
The current growth decline for the G7, on the other hand, is far worse – worse