Gentlemen, what is your forecast for economic growth in 2021?
Edwin Kuhlman (Atradius): 'For the Netherlands, we expect gross domestic product growth of 2.9%, after a contraction of 3.8% in 2020. Our expectation is for the economy to return to its pre-pandemic level by 2022. Global trade is picking up, partly because the United States is making up for the contraction in GDP and Asia is showing strong growth rates. The Dutch manufacturing industry in particular benefits from this pick-up in world trade. The retail and services sectors are lagging behind due to ongoing lockdowns. What we also see: government support in the Netherlands - given the exceptionally low bankruptcy rates and low unemployment rate - is very effective for the time being.'
Arthur Schellekens (Coface): 'We expect economic growth of around 3.5% in 2021 for the Netherlands. Growth forecasts are higher for Germany (+3.6%), France (+5.4%) and the UK (+4%), but there the contraction in 2020 was also sharply higher. Normally, six months after the onset of an economic recession, we see an increase in business failures. This is not the case now. Various supportive government measures, including those between the state and credit insurers, and deferred tax and rent payments contribute to this so-called bankruptcy paradox. We still expect an increase in corporate bankruptcies from the second half of 2021 onwards.'
Johan Geeroms (Euler Hermes): 'At Euler Hermes, we follow the forecast of the Central Bureau of Statistics (CBS). They currently count on a growth of almost 3%. It should be noted that the economic growth figures are adjusted almost every month. THAT growth is coming, now that vaccinations have started, is in our view beyond doubt.'
What measures do you take to eliminate bad risks but continue to issue sufficient limits? You don't pull out the umbrella when it starts raining, do you?
Edwin Kuhlman (Atradius): 'Our risk underwriting is now no different from normal. However, transparency has become even more important. In cooperation with our customers, we therefore try to get as much information on buyers as possible. We do not do generic actions at sector or portfolio level, for instance, but assess each debtor individually. We continue to issue limits even if debtors have been hit by the corona crisis. But only if the company has taken adequate measures to get through the crisis, e.g. by using NOW and/or continued support from banks and other (financial) stakeholders. In doing so, like all credit insurers, we retain the ability to adjust limits. For instance, in case of impending bankruptcy, reports of non-payment or to better match actual trading volumes. We would do this even without a reinsurance programme.'
Arthur Schellekens (Coface): 'Coface has experienced several crises since its establishment in 1946. During those periods, we have always assisted our clients in making the right supplier credit choices. In recent years, we have invested in the scope and quality of analysing and assessing debtors. Our professionals have access to more, better and more up-to-date information on accounts receivable than ever before, partly thanks to big data, algorithms and artificial intelligence. With our unique global network of analysts, we are better placed than ever to provide up-to-date, local and accurate estimates of debtor risks and the likelihood of a company being able to meet its payment obligations over the next 12 months.'
Johan Geeroms (Euler Hermes): 'Covid-19 and its consequences have affected the cash flow of many companies. The crisis is far from over and the impact is wider than many people think. It is not just the sectors that keep being mentioned, such as transport, hospitality and entertainment. We see in our figures that cash flow problems, payment delays and bad debt are on the rise in all sectors.
'It is not only the smaller companies that are vulnerable, also the very largest ones. You think you are doing business with a 'giant' and think you are safe, but it is precisely in that corner that hits hard. The trend that more and more large concerns are collapsing worldwide has only intensified. When in doubt, it can be important to share recent payment experiences and it is important to know the supplier's position with the buyer.
'Our motto remains "case-by-case approach" based on an increased degree of monitoring. More frequent requests for recent figures combined with talking to debtors and their suppliers (our customers) gives us an accurate picture of the current risk profile and expectations'.
What if the State reinsurance is not renewed in its current form?
Edwin Kuhlman (Atradius): 'Given our policy last year, we do not expect any material changes. Adjustments are possible at the individual level, for instance on debtors in sectors that have been hit hard. If reinsurance stops, we will continue with our current limit policy. Despite the difficult economic conditions, we handle every credit limit application and where possible we still issue a credit limit. In doing so, we take into account our position as at 30 June 2021 as best we can, but we obviously consider all available information in our decision-making process. A credit limit can also be partially issued if, for example, the credit limit application is disproportionate to the size of the debtor.'
Arthur Schellekens (Coface): 'At the onset of the pandemic, Coface was one of the initiators of cooperation between credit insurers and the government in several countries. This kept it possible to strike the right balance between damage prevention and coverage. The resulting calm in the market has helped SMEs in particular and their associated employment a lot. In a way, this has temporarily disrupted the market, we must now move towards normalisation. What that road looks like will have to be seen in the coming months. Either way: our sector should be able to function autonomously.
'Coface is ready for that, but of course there are challenges. The annual figures published for 2020 will be worse than normal in many sectors, making it harder to assess how a debtor is doing. Moreover, many loans need to be paid off, starting with the huge tax debt. So bankruptcies are going to increase. On the other hand, with the current monetary and government policies, low interest rates and low number of bankruptcies, it is now still possible for banks and insurers to make earlier decisions in favour of the borrower, debtor and trade.'
Johan Geeroms (Euler Hermes): 'We see 2021 as a relatively high-risk year. The manufacturing sector has almost recovered but the services sector lags significantly behind. Due to the emergency shutdown of the global economy at the beginning of this year, the spectre of payment delays and sudden bankruptcies is all over again. Support packages will fade and we expect a sharp increase in bankruptcies. Of course, we look at sectors that are in dire straits, but even here you have companies that are outperforming the industry. So for us it is business as usual. What I would like to add: you can't see from the outside how lockdowns work out for each company. In a short space of time, financial health is severely affected. That calls for alertness. Do not rely on old certainties, but be healthily suspicious and look critically at your relationships.
'There are also positives: many individuals and companies were able to save huge amounts of money in the absence of leisure and holiday opportunities, but also because business trips and investment programmes were placed 'on hold'. We expect these to be released in the middle during the second half of 2021, so domestic spending will increase substantially.'
