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Allianz Trade Global Survey 2022
Amid Ukraine crisis, confidence and demand shock waves: What do exporters expect for 2022?
How is the current international environment affecting exporters and their willingness to trade? Allianz Trade, the world leader in trade credit insurance, decided to check the pulse of companies in the United States, China, the United Kingdom, France, Italy and Germany. Two surveys were carried out – one before the start of the invasion of Ukraine and one after, involving nearly 3,000 corporates.
The invasion of Ukraine has brought back significant headwinds to the global economic recovery
Before diving into the results of our Allianz Trade Global Survey, let’s take a look at our economic outlook. Following the invasion of Ukraine, we have cut our forecast for global GDP growth to +3.3% in 2022 and +2.8% in 2023 (compared to +5.9% in 2021), down by -0.8pp and -0.4pp respectively. Almost two-thirds of our downward revision is due to confidence and supply chain shocks, with the remainder due to higher commodity prices. Global inflation will also prove higher and stickier (6% in 2022, revised up by +1.9pp) because of higher energy prices and longer-than-expected supply chain disruptions, which will contribute to price pressures in equal measure.
“While current negotiations between Ukraine and Russia could provide a path towards a ceasefire, further escalation cannot be excluded, resulting in even harsher sanctions and counter-sanctions (including on energy supply). In such an adverse scenario, global inflation would soar to 7% this year while growth would decline to +2.5% before the global economy enters into a recession in 2023 (-0.3%)”, says Ana Boata, Global Head of Economic Research at Allianz Trade.
Additionally, we expect global trade growth to moderate by at least -2pp in 2022 to +4% in volume terms, just below its long-term average. Confidence and demand shocks will result in a loss of US$480bn in exports to Russia and Eurozone countries in 2022. However, net exporters of commodities in the Middle East and Latin America could benefit from higher commodity prices and potential substitution effects away from Russia. In terms of trade costs, sustained higher oil prices could lead to a new record high in freight rates in Q2 (+40% vs previous peak). Furthermore, the Covid-19 outbreaks in China and the zero-Covid policy will extend supply chain bottlenecks and keep suppliers’ delivery times elevated.
After the invasion of Ukraine, the share of respondents expecting an increase in their export turnover dropped from 94% to 78%
Last year was an exceptional one for exporters: Overall, 7 out of 10 declare they recorded higher-than-expected export performance. The US and Germany saw especially strong performance, with 75% and 76% of corporates saying they achieved higher-than-expected exports respectively. Nonetheless, exporters did have to adapt to a new normal in trade in a context of lingering lockdowns and transport bottlenecks. How? In the US, where companies were most disrupted by supply shocks, this entailed increasing inventories (48%), finding new suppliers (45%) and targeting new export markets (43%) to boost growth. Over a third of exporters in France, Italy and the UK say they also relied on finding new suppliers to cope with supply chain disruptions, while 39% of German exporters say they focused on new export markets, mostly those close to home such as France and Spain. Chinese exporters focused most on targeting new markets (62%), digitalizing their production (60%) and diversifying their channels of distribution further (56%).
Barely out of the Covid-19 crisis, and now facing the economic shockwaves of the invasion of Ukraine on global trade, what do exporters expect for 2022? Before the invasion of Ukraine, companies seemed to think that 2022 would bring them even more opportunities than 2021: Overall, 94% of businesses were expecting an increase in their export turnover, with the most optimistic companies in France and Italy (97%). Most exporters were planning to expand their businesses to new markets in 2022 (79%), especially Chinese and American firms (92% and 84% respectively).
But the military aggression in Ukraine and the massive sanctions imposed against the Russian economy changed the story. “Unsurprisingly, the war rattled these expectations: the share of respondents expecting an increase in their export turnover dropped from 94% to 78% (-16 pp). In Italy and France, where companies were the most optimistic, 29% (+26 pp) and 23% (+20 pp) of firms expect a decrease of their export turnover in 2022, respectively. Even if Russia and Ukraine are not key final markets for European exporters, the war situation is affecting global trade through indirect effects (supply chains, raw material, energy), weighing on export opportunities for firms”, adds Françoise Huang, Senior Economist for Global Trade and Asia Pacific at Allianz Trade.
More than half of respondents in Europe now expect non-payment risk to increase in the next six to twelve months
Exporters’ exposure to non-payment risk seems to have increased of late: Our survey shows that overall, non-payment issues had a moderate or significant impact on export activity over the past 12 months for nearly 60% of firms, with the highest shares in France (66%), China (65%) and the US (58%). Moreover, despite the strong economic rebound in 2021, cash hoarding in many corporates and a solid recovery in global trade, 50% of our respondents declare that payment times got longer in 2021, especially in France (62% of firms). Interestingly, among firms that have undertaken digitalization – which we would expect to smoothen transactions – 58% of respondents still reported longer payment times.
Non-payment risk will remain an issue for exporters in 2022: Before the invasion of Ukraine, nearly 1 exporter out of 3 expected payment terms and non-payment risk to increase. In China, 48% of respondents said that payment times grew longer in 2021, with household equipment (72%), oil and gas (67%), and retail (58%) being the most severe sectors. Looking at 2022, slightly less than one-thirds of Chinese exporters expect payment times and non-payment risk to rise.
Chinese exporters’ 2021 performance and outlook
Looking back to 2021 and before the invasion of Ukraine, 2 out of 3 respondents from China said that their export performance was somewhat to significantly more than expected, with top export destinations being the US (picked by 22% of respondents), Japan (17%) and the UK (11%). Chinese exporters were optimistic about the outlook of 2022, with 93% believed their exports revenue will increase, shipping more to the US (15%), the UK (10%) and Japan (9%). As for expansion to new markets, Japan (7%), France, Germany and Canada (6%), and the US, Italy and Australia (4%) were listed as top target destinations. In this respect, Chinese exporters were already the most ambitious before the invasion of Ukraine, when it comes to increasing investment: nearly 80% said they would invest more in 2022 than they did in 2021, compared with 61% in the US and 45% in Europe.
Allianz Trade contact
Jason Wong
+852 3665 8946
jason.wong(@)allianz-trade.com
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