East Europe Insolvencies Increase on Credit Crunch: Creditreform
February 08, 2012, 12:50 AM ESTBy Boris Groendahl
Feb. 7 (Bloomberg) -- Corporate insolvencies in central and eastern Europe rose last year, driven by Bulgaria, Hungary and the Czech Republic, as credit tightened and growth slowed in the second half of the year, Creditreform said today.
Corporate insolvencies rose 6 percent to 39,423 in the 11 countries monitored by Creditreform, a credit score and debt collection agency based in Neuss, Germany. Insolvencies more than doubled in Bulgaria, rose 21 percent in the Czech Republic, 16 percent in Hungary and 32 percent in Slovenia, Creditreform said in a study released today.
“The environment of the economies was largely determined by the debt crisis and its consequences in western Europe,” Creditreform said in the study, which also included Poland, the Baltics, Romania, Croatia and Slovakia. “Overall the situation is extremely strained because of the credit crunch that is becoming apparent.”
The unresolved debt crisis in the euro region has infected emerging economies in the continent’s east that rely on western Europe as an export market and funding source. Western European lenders, which control about three-quarters of the region’s banking industry, pose another threat as they are forced by regulators to recapitalize themselves, often by shedding assets, to guard against the effect of the euro crisis.
The International Monetary Fund cut its growth forecast for central and eastern Europe Jan. 24 as it is threatened by “strains in the euro area.” The region’s economies will expand a combined 1.1 percent this year, down 1.6 percentage points from a September forecast, the IMF predicted. Growth is slowing from an estimated 5.1 percent last year and will accelerate to 2.4 percent in 2013, the Fund said.
Baltics Improve
The number of insolvencies fell the most in the Baltic countries Estonia, where they almost halved, and Latvia, where they are down two thirds. In Lithuania, they were little changed. Romanian insolvencies declined by 16 percent, Creditreform said. In Russia, which Creditreform lists separately, insolvencies declined by 20 percent.
The insolvencies affect companies with a total of about 230,000 employees, Creditreform said, up from 200,000 a year earlier. Most of the companies that defaulted were in the trade and in the hotel and restaurant industry, according to the study.
“The outlook for 2012 isn’t rosy,” Creditreform said. “There could be systemic financial problems in central and eastern Europe if a further deterioration in the euro area leads to fiercer deleveraging of western European banks.”
--Editor: Zoe Schneeweiss
To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
