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Liquidity issues keep B2B trade credit risk high in Eastern Europe

By CreditMan Friday, May 15, 2015

2015 is expected to be a difficult year for Eastern Europe. The overall region's economic growth is forecast to contract 0.3%, mainly due to expectations of a severe economic contraction in Russia and Ukraine, and to continued weak growth in the Eurozone. This is forecast to place a long-term strain on corporate payment behaviour in Eastern Europe, causing the risk of payment delays and default on B2B invoices to remain high during 2015.

The May 2015 edition of the Atradius Payment Practices Barometer survey for Eastern Europe, a report based on feedback from over 1,000 companies across the Czech Republic, Hungary, Poland, Slovakia and Turkey, which sell on credit terms to B2B customers domestically and abroad, highlights that nearly 60% of the survey respondents in the region reported that late payment of domestic B2B invoices was mainly attributable to their customers' insufficient availability of funds (respondents in Western Europe: 51.4%). Respondents in Hungary (78.6%) experienced this most frequently.

According to responses across the countries surveyed, 41.2% of the average total value of domestic B2B invoices remained unpaid after the due date. Slightly more than the 40.2% average for Western Europe. 7.2% of domestic B2B invoices became delinquent (unpaid 90+ days after the due date), being highly likely to turn into collection cases, and 1.2% was written off as uncollectable. All these percentages were highest in Turkey at 55.2%, 13.4%, and 2.0% respectively. Notably more respondents in Eastern Europe (24.2%) than in Western Europe (18.5%) reported that invoice late payment from domestic customers was most often due to the customer's formal insolvency (liquidation, receivership, bankruptcy). This points to a somewhat difficult business climate in many countries in the region.

Despite notable differences in country-specific economic conditions across the countries surveyed, the highest percentage of respondents in Eastern Europe (22%) consider a likely decline in their trade flows to be the greatest challenge to business profitability this year. This is particularly the case for respondents in the Czech Republic (36%) and Poland (25%). This opinion is in contrast to that expressed in Western Europe, where cost containment, also in relation to late payment, is seen as the greatest challenge to business profitability in 2015 (24.1% of respondents).

Andreas Tesch, Chief Market Officer of Atradius N.V. stated, "Continued weak economic growth in the eurozone, geopolitical tensions around Russia and Ukraine, and volatile global financial markets are putting significant pressure on the economic and business climates in many Eastern European countries. The cumulative pressure creates downside risks to the region's economic climate. This will likely cause the levels of overdue payment and default on B2B invoices to remain high this year. Against this backdrop, diligent management of trade credit risk becomes essential to maintaining the financial health of the business."

The complete report highlighting the findings of the May 2015 edition of the Atradius Payment Practices Barometer for Eastern Europe can be found in the Publications section of the atradius.com website.

http://www.atradius.com

SOURCE Atradius N.V.