Central & Eastern Europe Insolvencies:Good times come to an end
A favourable economic environment was not enough to reduce company insolvencies in Central and Eastern Europe (CEE). While average GDP growth accelerated to 4.5%, i.e. the highest level in nine years, insolvencies increased by 6.4%. This latter figure ends the improving trend in business insolvencies, which decreased in both 2015 and 2016. 2017 saw an increase in insolvencies proceedings in nine countries1 and drops in only five2. The regional breakdown indicates a wide variety of dynamics, ranging from a 27.1% decrease in insolvencies in Slovakia, through to a slight increase of 2.4% in Estonia and a surge of 40.1% in Croatia.
These events are surprising, given that companies have faced the highest rate of economic expansion since 2008. Moreover, growth was balanced, with a strong contribution coming from rebounding fixed asset investments and household consumption, driven by low unemployment, soaring wages, and improved consumer sentiment. Funds from the new European Union budget fuelled public investments, and high capacity utilisation amid solid demand encouraged companies to expand.