Asia Economy

Companies in Asia Pacific are having a really hard time getting paid, survey shows

Key Points
  • According to the survey by credit insurance company Euler Hermes, 73% of respondents have "endured different levels of unpaid receivables over past three years" while 82% of them suffered from delayed payments in the same period.
  • The survey of 171 chief financial officers and financial directors was conducted between December 2019 and February 2020, "at the time when Asia Pacific economies were impacted by the triple whammy of U.S.-China trade feud, the prolonged social unrest that handed Hong Kong its first annual recession in a decade, and the Covid-19 pandemic which has begun to completely alter the global economic landscape," Euler Hermes noted.
A Hong Kong theme restaurant, a popular spot amongst local young people, is closed amid concerns of the spread of the Coronavirus (Covid-19) on March 26, 2020 in Hanoi, Vietnam.
Linh Pham | Getty Images

A large proportion of companies in Asia Pacific have been facing issues of unpaid receivables and late payments over the last three years, an industry survey found.

According to the survey by credit insurance company Euler Hermes, 73% of respondents have "endured different levels of unpaid receivables" in the past three years while 82% of them suffered from delayed payments in the same period.

Among those respondents, 8% and 22% respectively added that they "frequently" suffered from those payment trends.

The survey of 171 chief financial officers and financial directors was conducted between December 2019 and February 2020, "at the time when Asia Pacific economies were impacted by the triple whammy of U.S.-China trade feud, the prolonged social unrest that handed Hong Kong its first annual recession in a decade, and the Covid-19 pandemic which has begun to completely alter the global economic landscape," Euler Hermes noted.

Nearly 36% of respondents said they minimized exposure to less creditworthy customers, the most common method employed by companies to mitigate risks associated with trading at a time of heightened economic uncertainty, the survey found.

Lengthy U-shaped recovery 

Due to large-scale lockdowns that have averaged two months in countries that account for more than half of global population and GDP, "an economic shock of unprecedented proportions" has been triggered, noted Euler Hermes. It is forecasting global GDP to contract 3.3% in 2020 — reversing its previous prediction of a 0.5% growth. This is also twice the damage inflicted by the Global Financial Crisis.

Global insolvencies will rise by at least 20%.

The insurer expects global GDP growth to reach 5.6% in 2021 — subject to a full return of business-as-usual by mid-2021.

Overall, global trade is expected to fall 20% — or US$3.5 trillion — in 2020, Euler Hermes forecast. 

"The Covid-19 pandemic has instigated an unprecedented disruption to global economy and world trade, as production and consumption are scaled back across the globe," the firm said.

In Asia Pacific, all of the key economies — except for China and India — will likely experience a technical recession in the first half of 2020. Sectors taking the hardest hit will be electronics, non-food retail, transportation and automotive.

"Simply put, we consider this is the worst recession since WWII (World War 2)," Euler Hermes said in its report.