Coface, payment delays for Asian companies on the rise

(Il Sole 24 Ore Radiocor) - Asian companies expect payment behaviour to worsen due to economic uncertainty fuelled by the trade war. This is highlighted in Coface's Q1 2025 study of some 2,400 companies in the Asia-Pacific region. The respondents operate in nine markets (Australia, China, Hong Kong SAR, India, Japan, Malaysia, Singapore, Taiwan and Thailand) and 13 industries. "Asia-Pacific experienced a growth slowdown in 2024 due to weak global demand, rising costs and high interest rates," says Bernard Aw, Chief Economist for Asia-Pacific at Coface. "The record reached by Ulpd (ultra-long payments, ed) indicates that companies expect to face increasing financial difficulties. In addition to rising tariffs, companies are preparing to face a more unstable trade and political environment." Against this backdrop, 'we have revised down our GDP growth forecast for Asia to 3.8 per cent in 2025,' he added.

In 2024, credit terms were more restrictive than in 2023: payment terms increased from 64 to 65 days, while remaining below the five-year average of 69 days recorded in the 2018-2022 period. Ten of the thirteen sectors surveyed recorded an increase in payment terms, with automotives, textiles and chemicals marking the most significant changes. "Increasing competition in the automotive market," explains the study, "has pushed dealers to be more flexible in granting credit, using it as a competitive tool. As for the future, two-thirds of companies expect shorter payment terms, reflecting greater caution and priority given to preserving liquidity in an environment of increasing uncertainty.

The average payment delay remained unchanged at 65 days last year and the percentage of companies experiencing delays dropped to 49%. However, a new peak emerges in ultra-long payment delays (more than 180 days and exceeding 2% of annual turnover), amounting to 40% in 2024, compared to 23% in 2023. "This represents a very high risk, since, in Coface's experience, 80% of these payments will never be honoured," the study points out. The timber, agribusiness and automotive sectors have seen the sharpest increase while, geographically, China, India, Thailand and Malaysia have the highest delays. China, India, Thailand and Malaysia recorded the highest delays. All sectors recorded an increase in Ulpd, with the most significant increases in thewood (+37%), agribusiness (+20%) and automotive (+18%) sectors. This trend is expected to continue in the next six months as well, 57% of companies, in fact, fear a worsening of payment delays.

Coface estimates that "the economic outlook for 2025 will continue to weaken. Rising tariffs and changes in trade policies have increased uncertainty about global economic policy, weighing heavily on business spending and consumer confidence". According to the survey, 33% of respondents expect economic activity to deteriorate in 2025 (compared to 2024), more than double last year's survey. Taiwan and Singapore are the most pessimistic countries, where more than 4 in 10 respondents expect a deterioration. "The survey results confirm the growing risk of payment deterioration in Asia, fuelled by economic uncertainties, geopolitical tensions and pressure on corporate margins. In this scenario, companies must reinforce risk monitoring and take preventive measures to protect their liquidity," comments Ernesto De Martinis, CEO Mediterranean & Africa Region of Coface.