Corporate debt is on the rise, as global volatility, inflation and dwindling COVID-19 relief packages hit companies around the world.

After several months of modest improvements, global supply chain pressures are rising along with costs and delivery times, according to a recent report from Atradius trade credit insurance.

Here are the key trends identified by the report:

A reversal of the previous decrease in insolvencies. The changing economic climate has created a widespread situation in which many supply chain-reliant firms have been unable to service their outstanding debts. In both the U.S. and most countries in Europe, instances of insolvency have been considerably increasing. Following notable drops in insolvencies in 2020 (5%) and 2021 (34%), the trend has been completely reversed, having already steeply increased by 70% thus far in 2022. This recent increase has completely erased all improvements that occurred in the previous two years.

There are currently several factors contributing to the sudden jump in insolvencies. Notably, the ending of most government support programs and increased demands from creditors have placed many firms in an untenable position. The sudden rise in the risk of insolvency has proven to be a truly global phenomenon, with New Zealand, Portugal, South Korea, and the Netherlands identified as four of the countries anticipating the greatest increases. Switzerland, Turkey, and Russia are also anticipating steep increases to be on the horizon.

Inflation continues to pose challenges. Inflation, which has been felt in nearly every country in the world, has made the recent wave of insolvencies particularly difficult to avoid. In the U.S., the year-over-year inflation rate was measured at 8.3% for April, slightly below where it was the month before (8.5%) but otherwise the highest it has been since the 1980s. In the United Kingdom, the inflation rate also reached a recent 40-year high, with officials reporting a year-over-year rate of 9%.

Energy industries, particularly petroleum, have been especially inflated. And due to the global supply chain’s ongoing reliance on fuel, it appears that many increases in consumer prices have been effectively made permanent. The ongoing risk of continued global inflation has caused some economists to adjust their expectations of future economic growth, with Atradius lowering their 2023 GDP growth forecast a full 0.8%, from 3.2% to 2.4%.

The ongoing pressures of global inflation have caused many of the world’s most important central banks, including the U.S. Federal Reserve, Bank of England and European Central Bank, to announce steep interest rate increases or promise sustained increases in the near future. The Board of Governors at the Fed, for example, recently announced an increase in interest rates to 0.9%, with Chairman Jerome Powell suggesting additional hikes should be expected on the near horizon.

Interest rate hikes will likely help combat inflation, with Atradius projecting that the global inflation rate will drop to 3.1% in 2023. But while tapering levels of inflation will likely make it easier for many companies to resume paying their debts on time — helping to resolve the ongoing increase in insolvencies — the systematic increase in the cost of borrowing might make new sources of debt more difficult to acquire.

The effects of some conflicts might be misattributed. While it’s clear that there are many underlying causes of the current rise in global insolvencies, it also appears that many sources of conflict have likely been overstated. In particular, despite widespread media coverage and clear levels of brutality, the true effects of the Russian-Ukrainian conflict on global GDP are probably more limited than many observers would expect.

Despite Russia once having the second-largest GDP in the world (as the Soviet Union), the IMF currently ranks its GDP 11^th, just behind Brazil and ahead of South Korea. Even when combined with Ukraine, the two recently warring nations only account for about 2% of the world’s economic output. So while it’s clear that the conflict between Russia (the largest country in the world, and home to many important routes and resources) and Ukraine (a resource-rich, though somewhat poor neighbor) will certainly influence global supply chains, the conflict’s effect on global GDP is likely to be limited.

Anomalies will resolve — eventually. Ultimately, the current reversal of insolvency trends and dramatic spikes in inflation can all be summarized in one word: anomalies. The COVID-19 pandemic unleashed a dramatic wave of seemingly once-in-a-lifetime events and responses, including incredibly high levels of government spending, structural lockdowns around the world, and sudden changes in consumer and worker behaviors. Once these anomalies are further resolved, insolvency rates should be expected to generally return to their pre-pandemic levels.

Dana Bodnar is an economist at Atradius, where she is responsible for macroeconomic and country risk analysis specializing in Central and Eastern Europe.