Asia Payment Survey 2023
In 2022, Asian businesses took a more stringent approach to credit terms amid a year of aggressive rate hikes, tighter financial conditions and higher inflation.
Coface’s Asia Payment Survey showed that fewer companies offered credit sales, but that average payment terms shortened from 71 in 2021 to 66 days in 2022. Most of the 13 surveyed sectors tightened credit terms, with ICT and construction shortening the duration of payment terms the most as higher input costs, labour shortages and weaker global demand put pressure on their financial positions.
Tighter credit terms coincided with longer payment delays. The average payment delay lengthened from 54 days in 2021 to 67 days in 2022. Six of the nine economies covered recorded longer payment delays, with the greatest increase reported in Malaysia. By contrast, payment delays were shorter in Hong Kong, Australia, and China, although Australian and Chinese businesses continued to report the two longest average payment delays.
However, longer payment delays did not cause a deterioration of credit risk as fewer firms experienced ultra-long payment delays (ULPDs), which are defined as overdue payments stretching beyond 180 days. The share of respondents reporting ULPDs exceeding 2 % of their annual revenue fell from 34 % in 2021 to 26 % in 2022. Monitoring ultra-long overdue payments is important because most ULPDs are never paid according to Coface’s experience. Therefore, cash flow risks tend to rise when these ULPDs exceed 2 % of a company’s annual revenue. Only two of 13 sectors (paper and retail) reported a greater proportion of respondents with ULPDs that increased from 22 % and 23 % respectively in 2021 to 29 % in 2022. Conversely, this share dropped the most for the textile sector where ULPDs fell from 38 % in 2021 to 14 % in 2022.
Ongoing geopolitical and economic challenges notwithstanding, Asian firms were more optimistic about growth prospects for the year ahead, with 77 % of respondents expecting economic growth to improve in 2023. Anticipation of increased economic activity led to a greater share of respondents projecting higher sales and improved cash flow for 2023. Coface expects a slightly faster rate of GDP growth for emerging Asia in 2023, but also anticipates elevated commodity prices, notably energy prices, higher interest rates, tighter financial conditions, and weak global trade demand will remain the key curbs
on business activity this year.
The Coface’s 2023 Asia Corporate payment survey was conducted between November 2022 and April 2023. It covered over 2,300 companies from nine markets and 13 sectors located in the Asia Pacific region.