Allianz expects another acceleration in global business insolvencies

Allianz, a global financial services company, recently released its Global Insolvency Report, revealing a 7% year-on-year rise in global insolvencies in the previous year. In a recent interview on CNBC Africa, Luca Moneta, the Senior Economist for Africa & Middle East at Allianz, shed light on the report's findings. Contrary to expectations, Africa showed a more optimistic outlook compared to the global average in terms of insolvency trends. Moneta highlighted that in 2023, the region witnessed only a 6% increase in insolvencies compared to 2022, with no significant rise projected for 2024. Interestingly, while Northern Africa, particularly Morocco, experienced challenges in insolvencies last year, Southern Africa saw a notable 13% decrease. Moneta attributed this improvement to the region's economic resilience, stable consumer spending contributing to GDP growth, and consistent exchange rates and monetary policies, setting a favorable environment. The Economist anticipates a modest recovery of 1.4% for the region's GDP in 2024. This positive outcome defies common negative perceptions of Africa's economic stability. Moneta emphasized that despite challenges in sectors reliant on logistics and electricity, such as the railway sector facing difficulties and trade bottlenecks post the Red Sea crisis, service-oriented sectors remain more optimistic. The conversation also delved into the upcoming US Federal Reserve interest rate cuts, suggesting that such global monetary policy shifts could impact African economies' insolvency outlook. Moneta pointed out that while cyclical concerns are significant, equally crucial are structural issues like debt transparency and institutional credibility in African economies. These factors influence sovereign spreads, credit conditions, and overall investment attractiveness, persisting beyond short-term monetary policy adjustments. Moneta's insights underscore the complexities of navigating economic landscapes in emerging markets like Africa, urging stakeholders to consider both temporary market dynamics and enduring structural challenges. The conversation positioned Africa's economic resilience in a new light, challenging stereotypes and promoting a more nuanced understanding of the region's financial landscape.