After a 2019 that was dominated by trade tensions between the United States and China, Coface has observed an incipent recovery in Asia (excluding China), supported by supply chain shifts and additional liquidity from the US Federal Reserve . Average payment terms improved in 2019, rising to 67 days compared to 69 days in 2018. And while 65% of companies reported experiencing payment delays in 2019 (63% in 2018), the average payment duration decreased to 85 days in 2019, down from 88 days in 2018.
All Coface Publications
Although the second quarter of 2020 is shaping up to be the most challenging period of the year, there are now good reasons to think that the road to recovery will be long and arduous. Despite immediate tax deferrals, liquidity guarantees, it is likely that many firms will find themselves in difficulty.
According to Coface forecasts, Spain and Italy will be among the economies hardest hit by COVID-19, contracting by 12.8% and 13.6% respectively in 2020. Corporate insolvencies are expected to increase by 22% in Spain and 37% in Italy by 2021, relative to 2019 levels. For 2021, Coface forecasts that Spain and Italy’s GDP will rebound by 10.2% and 8.9%, leaving the economies 3.9% and 5.9% below 2019 levels.
The economic consequences of the COVID-19 pandemic are of an unprecedented scale in Europe. The twin supply-demand shock has resulted in the halting of production (at least partially) in many companies as employees cannot go to work and in a fall in consumption because of mobility restrictions. The decline in revenues has deteriorated companies’ cash positions, fostering an increase in payment delays – and, ultimately, payment defaultsRead More
A few weeks after the first containment easing measures, economic activity seems to be picking up in most European countries. However, about two months after China, this gradual and partial recovery will not erase the effects of containment on global growth.
In this context, Coface forecasts that the recession in 2020 (a 4.4% drop in world GDP) will be stronger than that of 2009. Despite the recovery expected in 2021 (+5.1%) – assuming there is no second wave of the coronavirus pandemic – GDP would remain 2 to 5 points lower in the United States, the eurozone, Japan, and the United Kingdom, when compared to 2019 levels.
Our survey shows a deterioration in payment behaviour in 2019, which ultimately does not bode well for Chinese companies in the context of weaker activity in 2020. Coface expects growth to fall to 1.0%, the lowest level in 30 years, so given the historic correlation between economic activity and payment delays, we anticipate a sharp deterioration in 2020.Read More
Early 2020 marked by a sudden interruption in world trade, hampered by a global recession and soaring uncertainty
The global recession is expected to coincide with a sharp decline in international trade this year, especially as international trade tends to decline more than GDP in times of crisis. However, the extent of this overreaction is difficult to measure. The World Trade Organization (WTO) forecasts a 13-32% decline in world trade. This estimate indicates that all regions would suffer a double-digit decline in their trade volumes.
While the focus so far has mainly been on China, Europe, and the United States, the consequences of the COVID-19 pandemic are likely to be even more severe for emerging economies.
Even though their degree of vulnerability to this shock depends on many factors, the starting point of their public finances is a key issue, as it determines their capacity to respond to the crisis’ many economic consequences. However, their public debt was already at an all-time high in 2019. Coface assesses the direct risks (economic and sectoral) of the pandemic on the development of emerging countries.
Due to the current coronavirus (COVID-19) pandemic and its impact on the global economy, it is unlikely that China will be able to achieve its 2020 growth target. Coface forecasts a growth rate of 4% for the Chinese economy in 2020.
Economic activity in China could decelerate faster than expected this year and miss the Communist Party of China’s (CPC) growth target of 5.6%. In recent months, the Chinese economy has faced multiple headwinds, such as the consequences of the trade war with the United States, as well as structural factors, like the country’s demographic situation (15% of the Chinese population is over 65 years old). In this context, the COVID-19 pandemic is an additional shock that will add significantly to existing challenges.
At first, the COVID-19 epidemic in China only affected a limited number of value chains – but it has since turned into a global pandemic. Its repercussions have created a double shock – supply and demand – that is affecting a large number of industries in all over the world. The uniqueness of this crisis makes comparisons with the previous ones useless, as they all had financial origins (e.g. global credit crisis of 2008-09, great depression of 1929). The question is no longer which countries and sectors of activity will be affected by this shock, but rather which few will be spared.Read More
Despite the economic slowdown, Coface’s latest survey on business payments in Poland shows that payment delays have systematically shortened since 2017 – but the impact of the coronavirus outbreak on the Polish economy remains to be seen.
Payment terms: transport and construct offer the most generous credit periods
Poland’s GDP growth reached 4.1% in 2019 – a slowdown from the 5.1% recorded in 2018 – and is expected to slow further: Coface anticipates GDP growth in Poland to reach 3.3% in 2020. A relatively favourable macroeconomic environment has created supportive conditions for businesses in previous years. However, the full impact of the COVID-19 coronavirus remains to be observed, notably concerning trade partners. The coronavirus’ knock-on effects could further impact the economic outlook for Poland.
Coface Romania Study: Insolvencies in Romania decreased by 22% in 2019 compared to previous year, reaching its lowest level over the last decade
The majority of insolvencies were registered in the wholesale and distribution sector followed by the constructions and retail sectors
The most recent Coface Romania study shows that in 2019 there were 6,384 insolvent companies, -22% less compared to the level registered in the previous year. The data also indicate a gradual decrease of insolvent companies with revenues over EUR 0.5 million (medium and large companies). The latter reached 444 companies during 2019, below the average of 550 over the last three years. This evolution was also reflected in the decrease of financial losses of only RON 4.6 billion in 2019, half of the average for the last three years.
As Coface launches the 2020 edition of its Country & Sector Risks Handbook, Chief Economist Julien Marcilly today presents the main threats for the global economy in 2020 at the Coface Country Risk Conference in Paris.
The US-China trade agreement will not be enough to rekindle international trade
With 2019 being marked by a rise in protectionist rhetoric (more than 1,000 measures implemented worldwide) and the first decline of global trade in ten years, Coface anticipates that international trade will grow by only 0.8% in 2020. The truce trade agreement between the United States and China is unlikely to restore corporate confidence or significantly boost industry and world trade, especially as only 23% of the protectionist measures taken between 2017 and 2019 affect the United States or China. The rise in protectionism is therefore a global and lasting trend that to which companies will need to adapt
Turkey Payment Survey 2019: better picture in payment term but companies remain cautions regarding economic prospects
Right after the recession that the economy went into during the second half of 2018 the private sector remains mixed in terms of the economic outlook.
Payment terms: shorter terms reflect preference for liquidity
The deterioration of cash flow has slowed down and fewer companies expressed tougher conditions while making their payments. Nowadays, the average payment term offered by Turkish companies to their clients stood nearly at 85 days in the domestic market and at 69 days in export markets (vs 108 days in 2017).
Hit by increasingly stringent regulations, particularly for environmental purposes, the global automotive industry is facing a downturn and is being forced to reinvent itself.
In a gloomy global economic context, the automotive sector faces several very specific challenges, including stronger and stricter environmental regulations. As a result, car sales are experiencing negative growth not seen since the Great Recession of 2008 and there is an uncertainty prevail in the sector.
While the number of companies facing corporate insolvency has decreased since the beginning of the year, their cost has increased, both financially and in terms of the number of jobs affected.
After a difficult first quarter, marked by the repercussions of the “yellow vests” movement, the number of corporate insolvencies since the beginning of the year in France is set to decline for the fourth consecutive year. However, Coface expects a slight rebound in insolvencies in 2020 (+0.9%), mainly due to the expected slowdown in the construction sector, which was largely driven by public works in 2019 in the run-up to the municipal elections.
According to Coface's 2019 Germany payment survey of 442 companies, the country is in a phase of change. The pressure on companies from international competition is increasing. This is one of the reasons why the pressure on their cash flow continues to increase. On average, German companies saw their payment terms increase from 29.8 days in 2017 to 35.9 days in 2019.
Even if credit risks are insured, companies' confidence in their customers has declined. Short- and medium-term credit periods still dominate the market. 87% of companies request that payments be made within 60 days – a very short time in terms of international comparison. Clients missing payment deadlines now affects 85% of German companies, compared to 78% two years ago.
Recession or slight decline, CRAFT provides the keys to the slowdown in the major economies of the Eurozone.
Since the beginning of 2019, there have been increasing signs of a slowdown in global growth. While all economists agree on this downward trend, after reaching the peak of the cycle in 2017, the question mark now lies in the extent of this slowdown, particularly in the Eurozone. While some people mention a recession in 2020, most economists predict "only" a slight slowdown.
To have more clarity, it is therefore important to have reliable and innovative forecasting tools to take advantage of existing indicators. This is why Coface has decided to develop its own forecasting tool: CRAFT (Coface Research Activity Forecasting Tool).
Agri-food sector outlook: in a global economy marked by protectionist tensions, what does the future hold?
Central to the current trade tensions, notably between the USA and China, the global agri-food sector is impacted by knock on effects, notably via downward trends on the prices of key agri-food commodities, such as soybean. Coface has conducted an in-depth analysis of future trends in this market.
A particularly strategic sector, agri-food (along with ICT) is one of the sectors key to the current trade war between the United States and China. Recently, Chinese authorities have taken steps to ban all agri-food imports from the United States, in response to the tariff increases announced by the Trump administration.
With business morale being affected by a summer marked by a multiplication of areas of political uncertainty around the world, it seems likely that 2020 will be a year of economic decline.
The Argentine currency crisis, major demonstrations in Hong Kong and Russia, Brexit, the attack on oil installations in Saudi Arabia – these are just some of the many events that marked the third quarter of 2019. Increasing political uncertainty, combined with the decline in the volume of world trade, the high volatility of oil prices, and the decline in automobile sales in Europe and China, has continued to affect corporate morale.