Trade credit insurance firm Euler Hermes anticipates global corporate bankruptcies will rise this year by 2% for the first time in seven years, and exporting giant Germany is no exception with cases expected to increase by a percentage point in 2017.
Still, Euler Hermes analysts expect German exports to grow by some $104 billion by 2017. "Exporters are pressing hard on the gas pedal,” said Ron van het Hof, CEO of Euler Hermes Germany, Austria and Switzerland. “Over the next two years they will even post stronger export growth than China ($96 billion) and gain pole position through this overtaking maneuver.”
Overall, German exporters have stable profit margins, and though world-wide economic turmoil could dampen profit expectations in the near term, payment behavior of German companies remains strong, according to Euler Hermes. For instance, DSO at listed German companies is 56 days compared to the global average of 67 days.
"It is interesting that payment delays fell last year, but non-payments were up 3%," said Ludovic Subran, chief economist at Euler Hermes."This, combined with high competitive pressure and below-average margins, confirms the trend reversal we predicted, with insolvencies stagnating once again in Germany in 2016 followed by a slight rise in 2017."
Germany’s largest trading partner, the United States, is expected to see a 3% rise in insolvencies, while its other two-largest trading partners, the U.K. and China, could see a rise in insolvencies of 1% and 20%, respectively.
The picture in emerging markets is also less than sanguine. Bankruptcies in Brazil could rise as high as 22%, while Colombia and Chile could see insolvencies grow by 13% and 11% over the next two years, respectively, Euler Hermes said. Asian “supplier countries,” like Hong Kong and Singapore will see 15% more bankruptcy filings, and Australia, South Africa, Turkey, Russia, Greece and Switzerland are also on track for more bankruptcies.
- Nicholas Stern, NACM editorial associate