Thailand: Businesses report longer payment delays

Fewer businesses in Asia-Pacific reported overdue payments in 2022, but the duration of payment delays increased markedly, according to Coface, the France-based multinational credit insurance and risk management specialist.

The share of companies reporting overdue payments fell to 57% in 2022 — the lowest in 10 years — from 64% in 2021. But the average payment delay lengthened to 67 days from 54 days in 2021, the Asia Corporate Payment Survey found.

Conducted by Coface between November 2022 and April 2023, the survey involved 2,300 companies in nine markets: Australia, China, Hong Kong, India, Japan, Malaysia, Singapore, Taiwan and Thailand.

The duration of payment delays reflected the fact that businesses were more restrictive with credit terms amid aggressive interest-rate rate increases, tighter financial conditions and higher inflation, Coface said.

Seven of the 13 business sectors covered by the survey registered longer average payment delays. Overdue payments increased the most in retail (15 days), pharmaceuticals (10.5 days), and energy (10 days). The energy and construction sectors posted the longest average payment delay at 77 days. On the other hand, agrifood and textiles reported the shortest payment delays, with a drop from 60 days in 2021 to 52 days in 2022.

Based on Coface’s experience, 80% of payments overdue longer than six months — known as ultra-long payment delays or ULPDs — are never paid. Consequently, cash-flow risks arise when these ULPDs account for over 2% of a company’s annual revenue. The good news is that the survey shows a decline in the proportion of respondents experiencing ULPDs exceeding 2% of annual revenue, falling from 34% in 2021 to 26% in 2022.

But despite an improvement in most Asian countries, the situation in Australia was different as the proportion of respondents with such ULPDs expanded from 56% in 2021 to 63% in 2022. Malaysia also faced a rise in cash flow risk, with the percentage of firms reporting such ULPDs rising from zero in 2021 to 26%.

Overall, the situation could deteriorate in the months to come as corporate insolvencies rose in Japan, Korea, Australia, Hong Kong and India in the first half of 2023.

Thirty-nine percent of survey respondents explained that the rising price of raw materials was the factor that affected their sales and cash flow the most in 2022. Other factors were disruptions to operations due to lockdown measures leading to an insufficient workforce (27%) and a decline in demand (20%).

Elevated commodity prices, notably energy prices, high interest rates and tight financial conditions, as well as weak global trade demand, are expected to curb business activity in 2023.

Prospects for 2023 appear to have brightened, with 77% of respondents expecting economic growth to improve in 2023. Companies in India and Thailand were the most optimistic with 92% (up 9.4 percentage points from 2021) and 86% (up 5.6) of respondents, respectively, anticipating higher economic growth.

Companies in Hong Kong and China, where lockdown measures were only dismantled in late 2022, expressed more confidence in greater economic growth for 2023, with the proportion increasing by 23.7 points to 77% in the former and by 16.3 points to 84% in the latter.

“This last survey reflected an improvement in payment experience for companies in Asia in 2022,” said Bernard Aw, chief economist for Asia-Pacific at Coface.

“However, the continuation of the war in Ukraine, escalating US-China technological rivalry, subdued demand in the US and European markets, high inflation, and aggressive interest rate hikes that contributed to tighter monetary and financial conditions, will continue to weigh on Asian consumers and businesses in 2023.

“Coface forecasts that economic growth in Asia will accelerate only slightly at 4.5% in 2023.”

Source: https://www.bangkokpost.com/business/2607361/businesses-report-longer-payment-delays