KUALA LUMPUR (April 2): Global bankruptcies of small and medium enterprises (SMEs) are set to rise significantly in 2021 and 2022 once policy support, forbearance and social distancing restrictions are scaled back globally, according to Fitch Ratings.
In a statement on its website on March 31, the rating agency, however, said it expects fewer bankruptcies than in previous crises.
It said so far there have been far fewer bankruptcies during the coronavirus crisis than in previous recessions, particularly among small businesses.
Fitch said direct financial support and forbearance measures, and interruptions of the bankruptcy process due to social-distancing restrictions have artificially depressed bankruptcies.
It said insolvencies will rise as these measures are phased out.
Fitch said the divergence of bankruptcy trends between small businesses and large corporates suggests that there may be a more marked increase in SME insolvencies.
“For example, the divergence between US business Chapter 11 and Chapter 7 filings in 2020 suggests a backlog of failures among smaller firms.
“The fall in SME failures in 2020 was also at odds with the rise in high-yield bond defaults,” it said.
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