Turkey Experiences a Significant Increase in Bankruptcy Cases in 2024, Placing it Among Leading Countries with a 23% Surge: Statement
In a troubling trend for the global economy, the latest edition of the Dun & Bradstreet Global Bankruptcy Report reveals a surge in business bankruptcies worldwide, with Turkey leading the way in notable increases. According to the report, Turkey has experienced a 23% rise in corporate insolvencies in 2024 compared to the previous year, placing it 11th among 47 economies tracked for bankruptcies in 2024.
The primary reasons behind this surge in bankruptcies in Turkey include persistent high inflation, currency depreciation, ongoing fiscal challenges, a sharp rise in borrowing costs, and weak consumer demand. These factors have combined to create economic strain for businesses, particularly those with low profit margins and those reliant on credit.
Inflation in Turkey peaked at 75.45% in May 2024, severely impacting business costs and consumer purchasing power. Combined with currency depreciation, which weakened the financial position of companies with foreign currency debts, and ongoing fiscal challenges that have constrained economic stability, businesses have been left struggling to stay afloat.
The sharp rise in borrowing costs, particularly affecting sectors with low profit margins, has added to the financial pressure on companies. Weak consumer demand, due to tight monetary conditions since 2023, has further reduced revenue streams for many businesses.
As a result, sectors with tight margins, such as retail, hospitality, and construction, have seen heightened distress due to the correction in bankruptcies. This trend is reflected in Turkey's increase in bankruptcies, which mirrors mounting financial strain from persistent inflation, currency depreciation, and ongoing fiscal challenges.
The report also points to the adverse impact of geopolitical tensions and supply chain restructuring, which disrupted traditional trade patterns and disproportionately affected export-reliant firms.
Looking ahead, Dr. Arun Singh, Global Chief Economist at Dun & Bradstreet, predicts that corporate bankruptcies will remain on an upward trajectory throughout 2025, with little relief expected until late in the year. This prediction is supported by the fact that 65% of the monitored economies experienced an increase in bankruptcies, a marked rise from 53% in 2019.
In light of these challenges, proactive risk management, data-driven decision-making, and diversification of suppliers and customers are essential for businesses to weather ongoing uncertainties and position themselves for sustainable growth. Moreover, integrating e-commerce effectively has become crucial for businesses to stay competitive in the face of changing market conditions.
The removal of government aid and low interest rates exposed underlying vulnerabilities in businesses, leading to a rise in bankruptcies. Refinancing challenges will persist, especially for businesses with lower credit ratings, and many will continue to struggle to secure new funding.
In conclusion, the surge in global business bankruptcies, as highlighted by the Dun & Bradstreet Global Bankruptcy Report, serves as a wake-up call for businesses worldwide. Adopting proactive strategies, such as effective risk management, data-driven decision-making, and diversification, will be key to navigating these challenging economic times and positioning businesses for sustainable growth.
[1] Dun & Bradstreet Global Bankruptcy Report, 2024.
- Russia, being one of the 47 economies tracked in the Dun & Bradstreet Global Bankruptcy Report, saw an increase in corporate insolvencies in 2024, although Turkey experienced a more significant rise.
- President Erdogan's government in Turkiye is grappling with the rising number of business bankruptcies, a large percentage of which can be attributed to factors like high inflation, currency depreciation, and ongoing fiscal challenges.
- In Turkiye, many businesses, particularly those with Turkish lira debts, have struggled under the weight of inflation, which reached a peak of 75.45% in May 2024.
- The Turkish government's decision to remove government aid and the subsequent increase in borrowing costs have highlighted underlying vulnerabilities in the country's businesses, contributing to the surge in business bankruptcies.
