Comparison of exporting countries – where payment is most frequently overdue

Germany overtakes Turkey. Poland and Bulgaria also record a sharp increase in arrears.

Acredia publishes the top 10 exporting countries with the highest payment arrears for their policyholders for the third quarter of 2017. Figures at the end of the third quarter were compared with those from the second quarter of 2017.

  • Germany: arrears as a result of major bankruptcy increased swiftly in the third quarter.
  • Turkey: the lira at a record low brings risks for exporters.
  • Poland: political situation unsettles the markets.
  • Bulgaria: domestic demand and tourism are driving forces.

Germany: major insolvency fuels an increase in payment arrears

After more than a year, Germany is back in the list of top 10 countries with the highest payment arrears. The major bankruptcy of a German kitchen manufacturer catapulted Germany to first place in the third quarter of 2017. This insolvency was preceded by significant payment arrears.
Overall, employment growth in Germany continues and consumption is encouraging sustained economic performance. All in all, the prospects are good for Germany – the biggest commercial partner for Austria's exporters. Nevertheless, Karolina Offterdinger, a Board Member at Austria's leading credit insurer ACREDIA, has some advice for exporters: "Even if you supply customers in our neighbouring country who have been reliable so far, you should still send reminders as soon as payment becomes overdue."

Turkey: the high price of the euro increases risk of arrears

After four quarters, Turkey has ceded its number one position to Germany. According to Acredia, the positive trend in payment arrears is a statistical effect: following the rapid increase in arrears in recent months, arrears should in fact have fallen; however, they are still very high. "Trade between Austrian companies and Turkey continues to flourish overall. However, our experience of Turkish customers' payment practices is not significantly improving," reports Offterdinger.
According to Acredia, the current record low of the Turkish lira is posing new challenges to Austrian exporters. Whether the price improves remains to be seen. However, Offterdinger is adamant that one thing should be considered: "The more expensive the euro becomes, the more difficult it will be for Turkish customers to pay their outstanding debts."

Poland: recent political developments threaten economic performance

"Sales are increasing and risks remain, so arrears ultimately increase," explains Offterdinger. She suspects recent political developments to be the reason for the currently worsening economic climate. For example, legislation was recently passed to restrict the freedom of the media and the independence of the Higher Administrative Court, and extend the power of the police. "We'll have to wait and see how things develop. We are definitely keeping an eye on the country's further development," affirms Offterdinger.
In the past, Poland was the growth leader amongst central European EU member states. The country's domestic economy continues to be strong with good progress in both consumption and investment. However, the increase in wages and salaries in recent years means that cost benefits in production have fallen. To remain competitive in the long term, this key commercial partner of Austria needs to reorientate its economy in the medium to long term, in order to increase its future innovative capacity, for example.

Bulgaria: promising progress continues for economic prospects

"Despite the undoubted positive prospects, exporters should not lose sight of the politically unstable situation and latent legal uncertainty," warns Offterdinger. "The positive economic outlook for 2017 is an opportunity for Austrian enterprise, but no reason for negligence," adds Offterdinger critically.
Since 2015, Bulgaria has recorded strong growth momentum, chiefly attributed to private consumption and tourism. Private consumption remains likely due to increasing levels of employment, which is also a key support for the economy. An increase in investment is also anticipated, which will provide fresh impetus for the country's import momentum. In comparison with prosperity in the EU, Bulgaria has some catching up to do. Nevertheless, according to Acredia, developments are moving in the right direction.

In most cases, arrears give rise to losses

In 75% of cases, arrears precede loss. The other 25% results from customer insolvency. "If our policyholders register increasing levels of arrears, we see this as a key indicator of a country's future development. As experience tells us, it is precisely in these countries where losses also increase," explains Karolina Offterdinger, a Board Member at Austria's leading credit insurer, Acredia Versicherung AG.

08 November 2017

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