CEE insolvencies study 2024

In 2023 company insolvencies in the Central and Eastern European (CEE) region continued their growth trend that was initiated back in 2020. While businesses experienced reduced adverse effects from the Covid-19 pandemic in both 2020 and 2021 thanks to wide-scale support measures, next few years brought an even more challenging environment after governments phased out most of this support. As a reminder, the support mentioned included moratoria on insolvency applications as well as various measures to cushion the pandemic impact on the liquidity situation of companies to save them from bankruptcies. Among other measures, those included tax exemptions and deferrals as well as social security contributions, furlough schemes, loans, subsidies and other financial assistance, guarantees, supplementing employees’ salary and facilitating and simplifying various administrative procedures. However, not only the specifics in the business world but also macroeconomics triggered a further increase in company insolvencies. While Russia’s full-scale invasion of Ukraine resulted in a surge of energy commodity prices, supply chains disruptions and the immediate negative impact on CEE countries due to their geographical proximity to both those countries, the economies in the region proved to be relatively resilient. Nevertheless, such an impact continued to gain momentum and finally dealt a devastating blow on the CEE’s economic performance in 2023. Indeed, the region’s average GDP growth dropped from 4.0% in 2022 to only 0.5% in 2023, i.e. the lowest rate this century with the exception of recessions during the global financial crisis (2009) and the Covid-19 pandemic (2020). Furthermore, several countries including Czechia, Estonia, Hungary, Latvia and Lithuania recorded negative growth rates in 2023.

The economic downturn was caused by both external and internal factors. The CEE region’s main trading partners (i.e. Western European economies) fell into a slowdown or even recession while the dynamics of global trade turned to be less promising, which affected CEE exports. The domestic economy suffered from the surge in inflation which reached the highest levels in decades during first months of 2023. At the same time, central banks promptly responded to accelerated prices by tightening their monetary policy. High interest rates started to curb inflation, however, this also limited economic activity. At the same time, companies were not only suffering from high input costs but also an ongoing tight labour market with labour shortages and the pressure on wage growth. This pressure resulted not only from difficulties in fulfilling vacancies but also growing prices in a number of goods and services categories. Unlike 2021 and 2022, when the economic and business situation facilitated growing turnover and company profits, that could not be continued for the entirety of last year. As a result, businesses experienced delayed effects of previous support measures, which had been phased out, which led to the economic contraction and further insolvencies in 2023.

The total number of business insolvency proceedings in CEE countries covered by our analysis rose from 36,208 in 2022 to 50,199 in 2023, which equates to an increase of 38.6%. That marked another year of double-digit growth of proceedings as dynamics reached 39.2% in 2022. 

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