Half of Asian businesses expect increased risk of insolvency

49% of businesses surveyed anticipate insolvencies among customers next year

The uptick in insolvencies that we saw following the pandemic will continue into next year, according to the results of the Payment Practices Barometer Survey. The annual poll features businesses of all sizes across Asia, including China, Hong Kong, India, Indonesia, Japan, Singapore, Taiwan and Vietnam.

The survey’s main takeaway this year is that insolvency risks remain across the region. 49% of the companies surveyed, especially in India, expect insolvencies among their B2B customers to increase during the coming year.

This echoes the insights of Atradius economists who noted in their recent insolvency outlook that the global insolvency surge is not over yet. The Atradius economics team predict an increase in insolvencies of 23% in Asia Pacific, largely attributing this to a regional slowdown in growth, particularly in China.

Survey shows signs of optimism

Despite the ongoing threat of insolvency, the majority of the businesses polled in the Payment Practices Survey also expressed optimism. There are several reasons for this. One is likely to be perceived improvements. In last year’s survey 5% of the region’s debts were reportedly written off, an improvement on the previous year’s 7%. This year, the survey’s respondents reported bad debts amounting to an average of 4%, reflecting further signs of improvement, albeit fairly small.

Perhaps the greatest sign of optimism can be seen in the responses to questions about projected payment behaviours. 58% of businesses reported that they expect to see an improvement in payments next year, with just 10% anticipating any deterioration.

Businesses anticipate growth

Almost three-quarters of the businesses polled in Asia (72%) said they expect to see an increase in sales next year. This, along with the positive predictions concerning payment behaviour, is encouraging and suggests we could see growth in the region.

However, caution is advisable. Potential sales growth alongside a heightened risk of insolvency can be a tricky time for businesses. At the very least, it presents difficult waters to navigate. Do new customers, or larger orders present an opportunity or a risk? For most, additional vigilance and the use of tools such as trade credit insurance will help mitigate the risk.

Download Atradius Payments Practices Barometer Asia 2024

Eric den Boogert
Managing Director, Asia

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