Many companies in Asia Pacific suffer from different levels of upaid receivables and delayed payments over the past three years, said Euler Hermes recently.
A survey conducted by Euler Hermes Asia Pacific, in which a total of 171 CFOs and Finance Directors in the region participated, revealed that 73% of firms in region face unpaid receivables and 82% experience delayed payments in the said period.
Among which, 8% and 22% respectively replied that they frequently suffered from above disturbing payment trends, survey results indicate.
As for mitigating risk associated with trading amid global economic uncertainties, minimizing exposure to less creditworthy customers (36%) was picked as the most common measure employed by decision makers, according to the trade credit insurer.
The survey was launched between December 2019 and February 2020, at the time when Asia Pacific economies were impacted by the triple whammy of US-China trade feud, the prolonged social unrest that handed Hong Kong its first annual recession in a decade, and the Covid-19 pandemic which has begun to completely alter the global economic landscape, Euler Hermes said.
The company expects global insolvencies to increase by at least 20% because of the deteriorating global economy, said Holger Schaefer, Regional CEO of Euler Hermes Asia Pacific.
The Covid-19 pandemic has instigated an unprecedented disruption to global economy and world trade, as production and consumption are scaled back across the globe, Schaefer noted, adding that the company expects two quarters of recession in goods and services trade (Q1 and Q2 2020) which will cause an annual volume contraction of -15%.
“As a whole, we expect 2020 global GDP to drop by -3.3%, which is equivalent to US$9 trillion lost or more than twice as bad as the global financial crisis in 2009,” he said.
Euler Hermes, however, is optimistic about growth in 2021.
“After two months of lockdown on average for more than half of the global population and GDP, we expect a U-shaped recovery with global GDP reaching +5.6% in 2021, subject to a full return of business-as-usual by mid-next year,” Schaefer said.
As for Asia Pacific, all of the key economies in the region except for China and India will likely experience a technical recession in H1 2020, while electronics, non-food retail, transportation and automotive are taking the hardest hit, Euler Hermes estimated.
“We expect aggregate growth of Asia Pacific to decline to -0.6% this year before rebounding to +6.5% in 2021,” said Françoise Huang, Senior Economist for Asia Pacific at Euler Hermes.