By Max Clarke
British exports to the Middle East and North Africa are as yet apparently unaffected by the current troubles, with a positive flow of payments being made for goods and services provided.
But looks can be deceptive, and with new payments expected to fall in April, the present calm may soon be shattered as the full impact of the political and economic crises on UK exporters is felt according to the credit insurer, Euler Hermes UK.
“Customers trading overseas typically extend credit over longer periods than credit terms at home,” says Mike Feldwick, Head of Foreign Risk Underwriting at Euler Hermes UK. “This means that potential problems with payments take longer to become apparent, which in turn means that the full extent of the troubles can be hidden for several months.”
The situation is being monitored on a daily basis and the vulnerability of all countries in the region, Mike says, has increased and evolution of payment patterns across the existing clients portfolio is being monitored accordingly. All trade currently credit insured with Euler Hermes will remain protected:
“Euler Hermes UK remains on risk for all existing transactions,” he says. “Credit insurance is designed to protect businesses against the unexpected, and this type of events clearly illustrates the case for credit insurance. Even with the benefit of hindsight, I don’t think anyone could have expected these popular revolts to have been so widespread or to have occurred so quickly, and as yet the implications these may have on businesses operating in these regions is still very uncertain.”
From an economic perspective, Egypt and Tunisia will have sharply lower GDP growth this year and Libya’s economy has already suffered greatly from infrastructure destruction and curtailed oil production. In addition, tourism revenues and inward FDI flows are likely to be reduced across the region, Mike says.
Some energy exporters (including Saudi Arabia, Kuwait, UAE, Iran and Algeria) may benefit, however, from higher oil prices, and Euler Hermes says those countries seen to be in effective transition towards a representative political system may receive international financial support.