Amsterdam 4 June 2014 - Credit Risk in Eastern Europe likely to deteriorate in 2014
Economic growth in Eastern Europe is forecast to slow in 2014. Real GDP growth of 1.7% is forecast for this year, compared to 2.0% in 2013. This is likely to result in an increase in corporate defaults in 2014, although from relatively moderate insolvency levels.
Responses of European businesses to the Atradius Payment Practices Barometer – June 2014 highlight better payment behaviour in Eastern Europe than in Western Europe with 31.9% of the value of receivables extending past the due date, 3.5% remaining outstanding after 90 days overdue and 1.2% being written off as uncollectable. This compares to 37.6%, 4.9% and 1.7% respectively in Western Europe. In Eastern Europe, Slovakian respondents were most impacted by overdue receivables and respondents from the Czech Republic by uncollectable receivables. Despite the differences in overdue and uncollectable invoices, the percentage of invoices more than 90 days past due in Eastern and Western Europe that are uncollectable is consistent at 34% and 35% respectively.
The Atradius survey of B2B payment practices interviewed over 3,800 businesses across 18 countries in Europe. In Eastern Europe, the Czech Republic, Hungary, Poland and Slovakia were surveyed. In addition to payment practices, the survey looks at challenges to profitability, credit management practices and Days Sales Outstanding.
Better advance knowledge about customers’ payment practices and ability to pay can be very valuable in limiting exposure to payment default and cash flow problems. According to survey responses, liquidity restraints are the primary reason for payment delays impacting 58.6% of survey respondents in respect to domestic sales and 37.5% in respect to foreign sales. Other reasons for payment delays provide more insight that can assist a business in taking steps to improve their invoice management. In Slovakia, 41.2% of respondents experienced payment delays from domestic customers who were using their credit lines as a form of surrogate financing. Advance knowledge of this can help in cash flow planning or negotiating credit programs with the buyers. In Poland 41.9% of respondents experienced payment delays on foreign sales due to the complexity of the payment procedure. With this knowledge they could try to simplify their payment procedures to increase speed of payment.
Ultimately concerns about receivables management culminated in 41.7% of respondents in Eastern Europe considering maintaining adequate cash flow to be their biggest challenge this year. This is 41% more than in Western Europe where 29.6% of respondents shared this concern.
Andreas Tesch, Chief Market Officer of Atradius N.V. stated, “While the situation in the Ukraine is expected to result in GDP growth slowing to 1.7% in Eastern Europe, growth is forecast to improve to more than 2% in the Czech Republic, Hungary and Poland, and to be just shy of 2% in Slovakia. Despite this, payment delays are common with almost 1/3 of invoice value extending past due and insolvency risks remain high; Both negatively impacting cash flow. Close attention to payment behaviour including good buyer information, forward thinking and credit insurance protection can promote better receivables results and improve cash flow.”
The Atradius Group provides trade credit insurance, surety and collections services worldwide and has a presence through more than 160 offices in 50 countries. Atradius has access to credit information on 100 million companies worldwide. Its products help protect companies throughout the world from payment risks associated with selling products and services on credit.
For further information:
Atradius Corporate Communications
Tel.: +31 20 553 2047