Atradius, November 2019: In a recent press release from international credit insurer Atradius, exporters are alerted to the increasing risk of payment defaults and delays in transactions with Polish customers.
While GDP in Poland is expected to grow solidly, by 4.0% this year and by 3.1% in 2020, the risk that suppliers will not be paid for services rendered is a growing concern. Sectors most affected include the Polish automotive industry, construction, the agricultural sector, mechanical engineering and consumer goods /electronics sector.
Payment defaults doubled
The uncertainties in trade with Polish companies have already increased considerably over the past twelve months. The Atradius Payment Practices Barometer 2019 for Eastern Europe shows the total value of unpaid receivables written off at the end of a fiscal year rose from 1.0 % in the previous year’s survey to 1.9 % in the last fiscal year.
Payment defaults in mechanical engineering
In a sectoral comparison, the mechanical engineering sector fared worst with companies posting 3.7% of receivables as a loss, followed by the agricultural sector at 1.9%. Payment risk also deteriorated significantly in construction and in the electronics sector with one in three invoices not paid at due date.
Average payments in automotive industry
Business with automotive manufacturers and suppliers based in Poland is also becoming increasingly uncertain. Suppliers are highly dependent on foreign demand; in 2018 alone, the industry generated 55 % of its sales through exports. Production in the sector fell by 4.4 % in 2018 compared with 2017 and a recent survey measured the average payment period at 115 days.
Atradius currently rates the payment risk for manufacturers in Poland as “moderate” and for Tier 1 and Tier 2 suppliers and car dealers as “increased”. Uncertainties exist in particular among Tier 2 companies. Strong competition and the increase in the number of electric cars is also likely to increase payment risks, with only a few firms able to develop innovations. A disorderly Brexit and US tariffs would also hit the Polish automotive industry hard due to its dependence on exports.
Particularly exposed to external risks
The main drivers of GDP growth are investment and consumption. Despite falling unemployment and rising salaries, labour shortages persist in various sectors, and this is further exacerbated by the lowering of the retirement age. Additionally, concerns about the Polish government’s economic and domestic policies remain. However, the greatest uncertainties for the Polish economy come from external factors such as US import tariffs and, above all, the Brexit decision.
The annual remittances from Poles living abroad to their families amount to around four billion euros, much of which comes from the UK. In the longer term, the UK’s withdrawal from the EU could also affect EU structural funds. Poland currently receives the most money from the fund, and its economic progress is dependent upon that support.