Corporate Insolvencies in Germany – Will the Trend Be Reversed?

A stable economy with rising incomes and growing employment has no doubt contributed to this, as have the improved quality of corporate balance sheets, falling interest rates and a good supply of credit from the banking sector. Since the beginning of 2018, however, manufacturing in Germany has been experiencing a general decline. Though booming construction activity and robust consumption have so far largely made up for this, the crisis in manufacturing could spread to the economy as a whole and this could drive the number of corporate insolvencies up again. This article therefore analyses the impact of a slowdown in GDP growth on the number of insolvencies in Germany. It is shown that only a sharp economic slump of more than 1 per cent would cause insolvency figures to rise. The current high quality of corporate balance sheets is a factor that makes a reversal of the present downward trend in insolvencies unlikely – even if the economy stagnates in 2020.