Credit Management January February 2020

INTERNATIONAL
TRADE
Monthly round-up of the latest stories
in global trade by Andrea Kirkby.
Fitch upgrades Ukraine
after recent election
THERE are a few upgrades around. Ukraine
has been upgraded by Fitch after its recent
election and won a €450m infrastructure
loan from the European Investment Bank.
New president Volodymyr Zelenskiy
looks set to pass a series of reforms, and
he's starting from a good place, with
government gross debt down from a peak
of 81 percent to 57 percent.
The UK currently does well in
specialised industrial exports including
aircraft and machinery, as well as
pharmaceutical and medical products and
cars. But services are also strong - and
there’s a growing consumer market in the
major cities, though distribution remains
difficult for some products owing to an
underdeveloped retail market. With GDP
growing at 4.2 percent and a new IMF deal
expected to boost the economy, this is one
of the more interesting European markets
right now.
A CERTAIN UNCERTAINTY
AROUND BREXIT
BREXIT will get done. So that will bring new
certainty, right? I'm not so sure. Agreeing several
major new trade deals in the space of a single
year seems a stretch, given that the EU - which
fields a trade team much larger than the UK's -
generally takes six or seven years. Granted, once
a deal has been negotiated, Boris Johnson now
has the firepower to ram it through Parliament
in short order (whereas the EU has to deal with
securing agreement from 27 individual countries
as well as the European Parliament).
But also, I’m waiting to see whether the details
are going to get sorted out. For instance, how
are ports and airports going to deal with new
customs requirements? How will certification for
technical products work? And crucially for many
exporters, how many days will new procedures
add to the process of turning orders into cash?
It's time to be very careful about your working
capital, unless you are sure your cash cycle isn’t
going to lengthen.
THE yield curve – the gap between long
term and short-term interest rate –
became inverted in August, and it gave
markets the jitters, because it’s known
as a pretty reliable lead indicator of
recession.
Quite a few fund managers have
been getting the heebie-jeebies. Pictet
started going overweight with cash
at the start of 2019 and is staying
that way. Anything between 12 and
TO STRIVE AND NOT TO YIELD
15 percent in cash is a hefty slug of
liquidity, though Pictet is also now
picking up small and midcap equities
to hedge its bets.
Oddly enough, though, the Baltic
Dry Freight index is moving up.
Usually, that's a pretty good indicator
for increased global trade. But as
Atradius points out, mergers and
consolidation in the shipping sector
have tightened supply so that may
be the main reason behind the
increase.
Overall, looking at the various
indicators out there, I wouldn't be
happy predicting a global recession,
but it does look as if global growth is
sagging. Make sure that you decelerate
smoothly and safely if that’s the case
don’t get overextended and keep a
close eye on your customers’ payment
records.
Advancing the credit profession / www.cicm.com / January/February 2020 / PAGE 38