Hong Kong, 17 March, 2015 – Atradius’ Annual Outlook & Risk Conference unveils insights for businesses in Asia to brace themselves against a tough year ahead, warning that political condition in Europe may start to impact the region along with other major risks associated with China’s economic stall.
Featuring a group of esteemed economists and experts as the key speakers, the conference placed its focus on the dire need for businesses in Asia to equip themselves with the right skills and knowledge to navigate the uncertainties of 2015, as a result of ongoing global economic turmoil.
“As the most dynamic region in the world today, Asia is well positioned to be the engine driver for economic growth. In fact it is, and Asia is leading the way,” John Lorié, Chief Economist, Atradius Credit Insurance N.V., stated during the conference. “However, Asia’s strength is also dependent on the global market which means that turbulence in the West has the potential to dent the positive developments. A premature interest rate hike in the US could pose a risk.”
While the US is showing robust economic growth, the Eurozone has just started to post positive growth figures. “The impact on the Eurozone from Russia’s economic meltdown, which is due to international sanctions and the plummeting oil price, is expected to be limited,” Lorié continued. “Lower oil prices, historically low interest rates, ample liquidity and a much lower Euro will significantly clear up the economic picture for the Eurozone in 2015 and onwards. Asian countries are expected to benefit from these higher growth levels, and export to the Eurozone and the United States may pick up.”
Closer to home, China’s slowdown, due to weaker demand and excessive debt also continues with its record-breaking low levels growth which we have seen in more than a decade. The Chinese government’s move to put the brakes on the economy has had an impact on small to medium size private enterprises’ liquidity, as credit is no longer easy to obtain from financiers. These enterprises need liquidity to run their operations and any interruptions to the supply chain will most likely lead to delays in payments upstream.
According to Lorié, Asian economic growth levels will stay ahead of the global pack. “The high investment levels driving past growth are no longer sustainable. A tightening of lending has become inevitable to support the stability of the financial system. We therefore envisage economic growth of 7% in 2015 for China, a figure that marks the upper bound of our forecast of 2016 as well. Hong Kong will improve its growth level in 2015 towards 2.7% and 2.9% in 2016, as the impact of political unrest in 2014 will vanish and healthy trade figures provide strong support.”
The lower oil price provides a welcome stimulus as well. Atradius expects the oil price to recover only gradually to the lower end of the USD 60 barrel per Brent levels in 2015 and USD 75 in 2016.
As for the business environment, Atradius’ proprietary research suggests that insolvency levels, though forecasted to be lower, remain high in 2015 in the Eurozone and particularly in its periphery. US figures indeed show lower insolvency figures in 2015 compared to 2014. “Asian insolvency levels are much lower and declining as well, with China being the notable exception as an increase can be expected on the back of lower growth and more restrained lending conditions,” Lorié said.
Going forward, Atradius sees an urgency for enterprises to step up their risk prevention approaches to ensure business sustainability in these uncertain economic times. Going through these tougher economic times will likely motivate enterprises to step up their credit control. “We have seen increased notifications from our customers citing deterioration in payment promptness from their trading partners. In view of these developments, we have become more prudent in risk underwriting, from customer evaluation, understanding of trade transaction, the products involved, buyer’s creditworthiness as well as the payment ability of their end customers,” Albirich Tang, Head of Risk, North Asia, Atradius Credit Insurance N.V. stated.
Credit insurance has and remains a very important part of European trade, and Atradius believes the awareness of credit insurance and its benefits are now very much flowing into Asia. “Understanding the entire flow and assessing these risks are the most important elements for credit insurance underwriting,” Tang said. “It’s important to become aware of credit insurance and how this could safeguard their trade receivables. Companies need to protect themselves against losses from non payments and seek peace of mind when trading with customers.”
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About Atradius
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.
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