Companies’ payment behavior does not yet demonstrate that the crisis has been overcome

03.06.2021

Comparing the consequences of the pandemic, one can note that compared to the previous crisis, the safety margin of Estonian enterprises has become larger, and the recovery is faster. On the other hand, the market statistics of exporting companies show increased compensation for loan-related losses and the pressure to prolong payment terms.

Recent analysis of payment irregularities performed by Creditinfo Estonia demonstrates that, compared to the 2008-2011 financial crisis, the negative impact of the current pandemic crisis on businesses has been smaller. “The analysis of payment irregularities and difficulties in the first quarter does not show any dramatic changes, but it should be borne in mind that the consequences of the crisis may manifest themselves with up to a one-year delay, and this period can be even more prolonged as a result of the use of government subsidies and payment breaks provided by the financial sector and the Tax Department,” said Jaanus Leemets, head of development at Creditinfo.

Creditinfo analysis shows that an increase in the number of liquidations of enterprises during both crises is observed in about a year after the crisis begins, and the first peak of the current crisis occurred in December last year. “We still assess the level of risk as high, since the uncertainty in the economy and in relations between companies has not disappeared, the liquidity reserves could have been largely used during the first wave, and the state’s wallet became even thinner. The abrupt negative change in payment irregularities characteristic of the crisis can primarily be seen in the tourism-related sectors: accommodation, catering, and entertainment. The construction and real estate sectors most affected by the previous crisis are still in good shape due to sufficient demand,” Leemets said.

Intrum, Europe's leading credit management company, pointed out that the the Covid-19 pandemic has had a dramatic impact on businesses across Europe – specifically within SMEs, who generally are more exposed for drop in revenues and liquidity squeeze.

 “Looking forward, there is clear concern about late payments and companies across Europe are worried about their debtor's ability to pay them on time, therefore early work with debtors, in order to stabilize the cashflow will be in focus for many companies this year”, said  Jelena Jurane, Intrum Client and Sales Director in Baltics.

The statistics of KredEx Krediidikindlustus show that last year the interest of companies in credit insurance increased, but now it has dropped again to the pre-crisis level. “The demand for insurance increased in two or three months after the start of the crisis, but the beginning of the year has already shown that interest has decreased again and the perception of risk has dulled,” said Ivika Kolk, head of sales at KredEx Krediidikindlustus. “However, despite the fact that further forecasting is difficult, the risks must still be assessed adequately.”

“On the other hand, compared to the previous year the total amount of compensation for damage and the average amount of damage increased. This indicates that the uncertainty and negative consequences caused by the crisis have not yet been overcome. The number of insolvent debtors has also increased,” added Kolk, stating that a number of cases show that in a crisis more and more large companies can be simply destroyed due to sudden insolvency. “Most of the losses are reimbursed precisely in the Nordic countries and other main export areas of Estonian business.”

The insured turnover of KredEx Krediidikindlustus in 2020 increased by 11%, exceeding 700 million euros. Of this amount, export turnover amounted to 450 million euros, which is 15.7% more than in the previous year. The largest countries of destination for insured exports are Sweden, Finland, and Latvia, followed by Lithuania and Germany.

As part of the information day for companies, representatives of KredEx Krediidikindlustus, Intrum and Creditinfo presented an overview of payment behavior and payment irregularities, as well as talked about opportunities to reduce risks. Sales manager of Saku Õlletehas Margus Masing also shared his company’s export-related experience.