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Data analytics companies are seeing the number of “zombies” grow. According to July data from Scorify, in three months the number of commercial “zombies” increased to almost 300 companies and reached 1,700. EUR, or 30.6%. more than two months ago. As of the middle of the last summer month, 39,160 companies, or 16.4%, had outstanding liabilities with Sodra. more than in June. According to the company, the average debt shot up 12.2 percent, from 4,981 to 5,590 euros.
In the “Monetary Affairs” program, Jekaterina Rojaka, Head of Business Development and Strategy at Creditinfo Lietuvos, said that we are going through a difficult and transitional period, when companies were “fed” with a lot of support, but now they have to get used to the new reality.
“For some, this new reality makes life very difficult, for some it gave an extra incentive to reorient and structure the company, to start working more profitably. But, in principle, a “zombie” company is a technical term and not entirely correct, since it could be defined very broadly. Zombie was originally used in Japan from the beginning, in 1991-2001, when the economy was in a state of great stagnation. These are, in fact, companies that are not registered as bankrupt, they may not even be on the brink of bankruptcy, but only earn the amount of money they have to pay interest on the money they borrow. It does not create enough added value, it does not accumulate enough profits to be able to invest, expand its product range and produce more added value, and accept people. In fact, there may be many more “zombie” companies in Lithuania.
We are currently focusing on a narrower definition and we are talking about companies that would not be able to pay their debts when support ends. And these companies can vary according to various calculations from 1.5 to 2.5 thousand. now. But times are turbulent, support measures are coming to an end and probably the highest threshold will be when it comes to returning to the State Tax Inspection (STI) those contributions that have been frozen for the last year and a half. Then we can see a bigger wave of bankruptcies, ”says the economist.
He points out that there is currently an exceptional situation both in Lithuania and throughout the European Union: in most countries the number of bankruptcies is minimal, even the lowest in a decade.
“However, the expected level of bankruptcies can be quite high. The numbers can be scary. We see that in countries where support measures have been removed before, as in Estonia itself, the wave of bankruptcies has already started. It continues to grow. gradually. In Lithuania, which is gratifying that in fact this period has forced a much closer review of their finances and many companies, at least present financial statements on time, which is very important, because it allows to verify the situation and status of the same business. partners. “- he commented on Mr. Rojaka, recalling that the STI had indicated that almost 200 larger companies were on the verge of insolvency, but that the biggest problem could be for small companies, which are they had been granted certain support measures and that support had gradually come to an end.
According to the report of the State Audit Office, although 47.5% was registered in the first quarter of this year. fewer bankruptcies than at the same time last year, concerns arise. After all, millions of state aid have been awarded to companies on the brink of bankruptcy. The Auditor General Mindaugas Macijauskas reported in the “Monetary Affairs” program that in the last 3 months insolvency proceedings have been initiated against 181 companies. Of these, 95 companies in 2020. almost 14 million. Most of the aid (12.6 million euros) was tax deferred.
“The amount of money is really impressive, but when it comes to bankruptcies, the number of companies that go bankrupt is basically small enough. If we compare 2019 with 2020, we have about 50 percent. reduction, if we compare 2020 with 2021, we have another 52 percent. decrease. That is if in 2019, we had an average of about 1,600 companies in bankruptcy every year, even in 2018 there were about 3,000. bankrupt companies, then in 2020 we had 786 companies, and in 2021. on April 12, we only had 162 companies. Apparently, we ourselves understand that this is not a natural process and those companies that did not fail under normal competitive market conditions would have failed and did not survive ”, said M. Macijauskas.
According to the Auditor General, this is related to state aid.
“80 percent. The aid package for COVID measures consists of subsidies, social benefits and reimbursement of various contributions and only 20% It consists of off-balance-sheet items such as tax deferrals, government guarantees and the like. Meanwhile, if we look at to other eurozone countries, this balance is reversed: 80%. consists of off-balance sheet instruments, that is, tax deferrals and state guarantees, and only 20% or, in some cases, less, payments and compensation for a supportive measure in particular, ”he said.
When will the bankruptcy wave hit and what effect will it have?
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