Germany Faces Deep Recession: Record High Bankruptcies and Struggling Sectors Shake Economy
September 11, 2024The retail sector, particularly fashion, is facing ongoing challenges due to consumer reluctance and high shipping costs, complicating recovery efforts.
Germany's economy is currently facing a deep recession, significantly impacting businesses across various sectors.
The construction sector has been particularly hard hit, with approximately 1,760 insolvencies reported, a staggering 27.5% increase from the previous year.
The number of major bankruptcies has surged, with 40 large insolvency cases recorded in the first half of 2024, marking the highest level since 2015.
This figure represents over a third increase compared to the same period last year, raising concerns about a potential domino effect on supply chains.
Experts attribute the rise in corporate insolvencies to multiple factors, including difficulties in repaying COVID-19 loans, high energy prices, and stricter credit conditions.
The automotive industry is also struggling, facing weak demand for electric vehicles and competition from China, further complicating the economic landscape.
In August 2024, there was a slight decrease of 0.5% in insolvencies compared to the same month in the previous year, totaling 181 companies declared insolvent.
In Baden-Württemberg alone, 1,245 insolvency applications were filed from January to July 2024, reflecting a 37.6% rise compared to the first half of 2023.
Key factors contributing to these insolvencies include sharply rising capital costs due to interest rate hikes since 2022 and significant cost increases in the construction and energy sectors.
Despite an increase in average payment delays, the proportion of companies making late payments has slightly decreased, with 92% of companies paying on time.
Looking ahead, Allianz Trade forecasts a moderate increase of about 2% in bankruptcy cases by 2025, potentially reaching around 22,000 cases.
Summary based on 23 sources
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Sources
Yahoo Finance • Sep 10, 2024
Insurer Allianz Trade forecasts 21% rise in German insolvenciesInvesting.com • Sep 11, 2024
Number of German insolvencies climbs further in AugustCyprus Mail • Sep 6, 2024
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