The latest report on insolvency in Poland shows that 2023 was not a good year for the country’s economy. In the past 12 months, as many as 4701 Polish companies declared bankruptcy, an increase of almost 2,000 from 2022. This constitutes a record high, according to economists from Coface, which prepared the report. The increase in bankruptcies was seen across all sectors except agriculture, raising concerns for the overall health of the Polish economy.
The annual number of insolvent companies has been rising steadily since 2016, when the figure was 760. Despite hopes for an economic recovery in January 2023, a significant economic slowdown followed the dynamic recovery from the Covid-19 pandemic. The past year also saw record inflation of 18%, and factors like high interest rates, rising fuel and energy costs, and wage pressure did little to help Polish companies. All these significantly contributed to the number of bankruptcies and problems in various sectors.
Much like in previous years from 2019 to 2022, most companies in 2023 opted for out-of-court proceedings to declare insolvency. Out of all companies, 60% or 4053 companies chose this option while 648 opted for bankruptcy and restructuring proceedings conducted by courts.
Experts, however, pointed out that the rising number of insolvent companies is partly due to the provisions of Polish law that accommodate companies experiencing liquidity troubles.
The Coface report points out that almost all sectors experienced a rise in insolvency in 2023 compared to the previous year, with the exception of agriculture which saw a slight decrease from 376 in 2022 to 347 in 2023.
The service sector faced the most significant problems, with 1401 insolvent companies. This was followed by trade, where 1023 companies went under – a considerable increase from 567 in 2022. Also noteworthy was the construction industry and transport – with insolvency increasing by 128% and 100% compared to 2022 respectively. As these are the sectors driving GDP growth, these numbers are cause for alarm.
Financial instability most affected companies in the Mazowieckie region, where 791 firms declared insolvency. This was followed by Silesia (619 firms), and Greater Poland (495 firms). However, companies in the Opolskie region fared the best, with only 75 organisations declaring insolvency.
Looking ahead to 2024, after a difficult 2023, entrepreneurs are hopeful. Coface forecasts that the Polish economy will grow by 2.8% compared to 2023. This is a considerable improvement from the 0.6% growth rate of the past 12 months, although it still falls short of the full potential of the economy.
Despite the improving economic prospects, it is expected that the number of insolvent companies will continue to rise. Not all entities will be able to survive in the market with increased margin pressure and high operational costs.
