Credit, collections & insolvency news
Atradius’ latest Insolvency Forecast reports Polish insolvencies are expected to grow by 7% this year after remaining static in 2020.
As a response to the pandemic, comprehensive stimulus measures supported many Polish businesses, enabling them to sustain their cash position. However, this support is expected to expire this year as the economic rebound gains momentum. However, the report warns this could potentially have an adverse effect on business liquidity and lead to rising payment delays and insolvencies, particularly in the sectors most affected by the pandemic such as transport, brick-and-mortar retail and services.
Whilst business performance and credit risk in both the consumer durables and metals/steel sectors have improved, leading to outlook upgrades from ‘poor’ to ‘fair’. In consumer durables, sales have rebounded in the household appliances and furniture segments and the outlook is also more positive due to an expected growth in household consumption. Meanwhile, metals and steel recorded a demand recovery in H2 of 2020, benefiting from restocking and resumption of production by end customers.
However, for some other industries such as construction, machines, services, textiles and transport, the performance outlook remains ‘poor’ for the time being. The report details that while construction businesses should benefit from the planned public infrastructure investments, operating margins remain very tight, with increased credit risk mainly for smaller players. In the transport segment, the credit risk in passenger road transport and road freight transport remains high. Meanwhile, in the service industry, many segments have suffered from pandemic-related lockdown measures, particularly hotels and catering, restaurants, bars, entertainment and cultural events, tourism, travel agencies and tour operators. Despite additional fiscal support with a warning that up to 30% of these businesses may not survive the pandemic crisis.
Meanwhile, Polish exports are expected to see a sharp rebound this year.
It is forecasted that exports will rise by as much as 9% in 2021 more than compensating for the 1.9% contraction in 2020 and supported by resurging demand from the Eurozone. Imports into Poland are also expected to rebound by nearly 10% in 2021 after a drop of nearly 5% last year.
The report reveals Poland’s economic contraction in 2020 due to the coronavirus pandemic was 2.8%, significantly less than the 6.4% average recession of EU member states. This is due to Poland’s economic performance being less dependent on exports compared to some of its Central European peers while private consumption accounts for 58% of Polish GDP, reducing its vulnerability to external shocks. Looking ahead, the economy is forecast to rebound by 3.8% in 2021. It is forecasted that private consumption to increase 3.5% in 2021 after decreasing by the same figure last year, sustained by increased government payments to families and pensioners alongside tax breaks while unemployment is expected to level off.
Richard Reynolds, Head of Strategic Accounts for Atradius UK, said “With an established trading relationship, imports and exports between the UK and Poland increased in the four years leading up to the pandemic and, despite being shaken over the past year, there are positive signs of recovery. With a large domestic market and often seen as a gateway into Central and Eastern Europe, Poland is an interesting proposition for businesses looking to trade overseas particularly in the consumer durables and metals sectors. That said, the pandemic has introduced a significant degree of uncertainty into the global trade environment which makes the associated risks even more acute. UK businesses looking to trade overseas must ensure they adapt to these risks as well as understand the potential impact on the wider market and on their individual customers. A robust risk management strategy and protection from non-payment and insolvencies is critical.”
