Polarization of Debt Collection Environment

We will continue to study 2018 iQor RMS Collectability Index in this blog. Our debt collecting data shows an increasing polarization of overall debt collection performance in 2018. Debt collection successful rate declined in Europe and the US but accelerated in parts of Asia Pacific such as Philippines and Vietnam. This trend became apparent in the second half of 2018 as the US-China conflict prolonged. We expect 2019 will be a tough and challenging year for debt collection.

2018 RMS Bad Debt Big Data:
Debt Collectability Analysis of Main Regions

​Energy exporting countries among emerging economies improved due to the surging oil prices in the beginning of 2018. However, Argentina, Brazil, Iran, and Turkey are struggling to cope with the sharp depreciation of currency against the US dollar which lead to currency crisis.

​According to the above data from UN Comtrade and ITC, the global imports in 2018 expanded compared to 2017. Not until the US-China trading tension escalated, international trade turned sluggish by the end of 2018. Some Asia-Pacific counties took advantages of the raging US-China trade war as manufacturers relocated factories and investors rerouted orders to lower-cost countries. In order to avoid high tariffs, China drifted exports to other regions and imported food and natural resources other than the US. Although global trade growth raised in 2018, the unpredictable factors slowed down economic growth which in turn caused global debt to increase. 

Uncertainties Arising from Trading Conflicts and Brexit

​The US protectionism has restricted trades with global partners since mid of 2018 and the US allies including EU and Canada fired back with retaliation against tariff increases. The global hostilities along with the long run Brexit resulted in loss of business confidence and weakened global economy. The industries under the US heavy tariffs, including electromechanical, communication, and steel and aluminum, overloaded the burden for overseas manufacturers. 

Below lists shows debt collection performance declined in the US and Germany compared to 2017. Six of the US industries include: clothing, food, furniture, wood, textiles, toys and sporting goods dropped in debt collectability rate. For Germany, the most serious decline were found in clothing, chemical, machinery and equipment, and telecommunications industries. The slowdown in trade growth since the fourth quarter of 2018 has continued to 2019. 

iQor RMS has received increasing inquiries about business information for enterprises with overdue payments in the past few months. After inquiring, some customers would entrust us to pursue the debt. At the moment, there is no large business debt or a breach of contract, but we have received numerous over-due payment cases for small and medium-sized enterprises, exporters, and logistics industry. Coupled with countries affected by the currencies devaluation, the heightened financial market pressure and risks mount up on the global economy.

​As part of the Belt and Road Initiative, most Asia-pacific members such as Philippines, Vietnam, and Malaysia achieved robust growth because of expected investment for infrastructure projects. The Philippine’s new industrial trading policy and Vietnam’s growth in manufacturing have promoted their strong economic growth. Debt collectability rate performance of these countries were outstanding in 2018.