Credit Management September 2019

Cooling off down under
AUSTRALIA has a slowing economy which
is suffering from the halo-effect of the
Sino-US trade war. With the lowest interest
rates in the country’s history – now at one
percent, down from 1.25 percent – some are
very worried about the medium-term future
of the economy. What makes the cut more
concerning is that it’s the second (down
from 1.50 percent to 1.25 percent in June) in
as many months.
And what should be worrying exporters
to Australia is that domestic demand is,
according to the governor of the Reserve
Bank of Australia, ‘weighed down by a
protracted period of low-income growth
and declining housing prices’. Further,
consumer debt burden is one of the highest
in the world.
Zimbabwe facing more turmoil
ROBERT MUGABE may have left
the political stage but his years of
mismanagement of the economy are still
creating mayhem. The problem is that the
Zimbabwean dollar holds so little value
– a one hundred trillion-dollar bill was in
circulation following the 2009
bout of hyperinflation – that many
have been using foreign currencies to
trade. However, at the end of June the
No-one likes inflation, but a certain
level is necessary for a healthy economy;
deflation is something to be avoided at all
costs. Rates have been cut to boost inflation
to between two percent and three percent.
Even so, with more interest rate movements
on the horizon, exporters should make
plans to diversify if at all possible.
Government decreed that the only legal
tender was the Zimbabwean dollar, a
product of a new electronic currency (the
RTGS dollar) and bond notes that were
designed to replace the US dollar which
are now too scarce to rely on. It follows that
it’s now much harder for local importers to
pay for their orders, and firms need to be
aware of this when selling to Zimbabwean
organisations.
Deteriorating Asian payment trends
COFACE has just published its ‘2019
Asia Corporate Payment Survey’ which
covered over 3,000 companies located in
nine economies (Australia, China, Hong
Kong, India, Japan, Malaysia, Singapore,
Thailand and Taiwan). The report found
that 63 percent of companies surveyed
stated that they experienced payment
delays in 2018. The length of payment
delays increased to 88 days on average
in 2018, compared to 84 days in 2017. The
delays were highest in China, Malaysia
and Singapore; as well as the energy,
construction and ICT sectors.
The survey found that economic
expectations deteriorated quite
significantly in a number of cases last
year. Over 50 percent of companies in
Now at one percent,
down from 1.25
percent – some are
very worried about the
medium-term future
of the economy.
Hong Kong, China, Japan, Singapore
and Taiwan stated that they do not
expect growth to improve in 2019. These
economies are directly and indirectly
impacted by the trade war between the
US and China. Despite this, 53 percent
of companies stated that they do not
use credit management tools to mitigate
risks. What was remarkable was that
markets with a majority of risk managers
who predict the economy will not
improve also feature a large percentage of
companies that admitted using no credit
management tools.
The bottom line? Watch your debtors
and manage terms with great care
because a number of firms in the region
are being a little lax.
Turning Japanese
ACCORDING to the Ifo Institute for Economic
Research’s ‘Business Climate Index’, Europe’s
economy could become like that of Japan
where low growth, low inflation and low
interest rates are the (new) norm. The
comment follows an end to nine years of
growth in Germany, a lull in optimism, and
a general fall in orders – partly as a result
of the US-Sino trade war, and also because
new emissions standards are stalling vehicle
orders. What is also worrying the Ifo Institute
is that a falling European unemployment
rate could be about to rise. The next step is
monetary stimulus which will do nothing for
those with savings, but it will help keep the
cost of borrowing low.
Turkey voting for
Christmas
TURKEY’S President Erdogan has sacked
the head of the country’s central bank –
Murat Cetinkaya, one year short of his term
of office. No reason was given for the move
apart from party members being told that he
‘didn’t do what was needed’. This has been
taken to mean he’s not lowered interest rates
which stand at an eye watering 24 percent,
up from 17.5 percent last September.
Exporters should expect more trouble
with Turkey. As Paul McNamara of asset
manager GAM said, the sacking was
‘incredibly stupid’ as the central bank has
effectively been undermined.
EXCHANGE RATES VISIT
CURRENCYUK.CO.UK OR
CALL 020 7738 0777
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by the Financial Conduct Authority (FCA).
HIGH LOW TREND
GBP/EUR 1.12200 1.06535 down
GBP/USD 1.24989 1.20276 down
GBP/CHF 1.23588 1.16888 down
GBP/AUD 1.81618 1.75768 up
GBP/CAD 1.64321 1.58937 down
GBP/JPY
CURRENCY UK
135.51936 126.71204 down
The Recognised Standard / www.cicm.com / September 2019 / PAGE 39