Economic growth is slowing, but business bankruptcies are declining.Global economic growth forecasts have been revised downwards almost every year since the financial crisis, with a lack of growth engines, fiscally hampered governments, and the preceding overinvestment all playing a part in establishing this pattern. However, despite the sluggish growth environment, global corporate failure rates have declined, reaching record lows in some major economies. And 2016 was no exception : out of a total of 38 countries in our analysis, 26 experienced falling bankruptcy rates relative to the previous year ; meanwhile the failure rate stagnated in two countries, and only ten countries saw the rate increase. This two-tier development– low growth but resilient businesses – illustrates on the one hand the severity of the previous financial crisis and the significant debt overhang left in its wake, and on the other the ultra-low interest rates and loose monetary policy across most of the developed world. The latter has not only supported businesses in developed countries, but has also stimulated a surge in capital flows to higher-yield emerging markets. The ensuing capital flow reversal (expected to take place as the Federal Reserve slowly normalizes monetary policy) counts as one of the main global risks in 2017. Analysis of the results based on the income status of the countries in our sample reveals that bankruptcy rates have declined in a majority of both developed and developing countries. The results are more overwhelmingly positive in the case of developed economies, but the trend is evident in emerging markets as well (more than twice as many countries had declining rather than increasing bankruptcy rates). In terms of regions, failures have declined in 16 out of 23 European countries in our sample, with only one large economy – the UK – represented in the ‘deteriorating’ group.
Nine out of eleven countries in our Asia-Oceania region had declining failure rates, including China (the largest economy in the region and a key global growth engine). The other global economic behemoths – the US, Japan and Germany – also experienced declining failure rates in 2016.