Allianz Trade: Global Trade Expected to Grow at a Lower Rate Following the War in
Ukraine and Covid-19 Outbreaks
Driven by the elevated delivery times due to renewed Covid-19 outbreaks in China and reduced
consumer demand, particularly in Eastern Europe following the Russian invasion in Ukraine,
Allianz Trade (previously Euler Hermes) has recently adjusted its 2022 forecast for the global trade
growth to 4.0% (2pp lower than expected before the war in Ukraine). At the same time, the value
of global trade is expected to increase to 10.9% (compared to 7.2% previously expected), fuelled
by the increasing prices of oil and other commodities such as metal and agri-food. The current
situation shows more than ever that proper monitoring and transparency is essential to closely
mitigate risks in the trading industry.
Facilitating Business for Indian Micro, Small and Medium Enterprises (MSMEs)
A number of regulatory acts introduced by the Indian government over the past 10 years with the
latest update in January 2022 are improving Indian MSMEs access to cost-efficient working capital
cash flows. With MSMEs being the backbone of the Indian economy, the new announcement is a
welcome move expected to revive the economy and bring the operating cycles back on track after
the contraction during the pandemic by widening the scope for companies that can undertake
factoring business. A positive development has already been registered with several non-banking
financial companies trying to take advantage of the market opportunity.
FASB Proposes Enhanced Disclosure about Supplier Finance Programs
In December 2021, the Financial Accounting Standards Board (FASB) issued a proposed
Accounting Standards Update (ASU) to enhance transparency about an entity’s use of supplier
finance programs. Under the proposed ASU, a buyer in a supplier finance program would need to
disclose key terms of the program such as the outstanding obligation amount, a rollforward of the
amount, and a description of where that amount is presented in the balance sheet. The proposed
update, which is still subject to finalisation, is welcomed by GSCF in order to increase transparency
of buyer’s financing.
NEWSLETTER – April edition 2022
Photo: Cherry trees Source: Unsplash.com
Global Supply Chain Finance AG (GSCF) is the leading servicing platform for receivables and payables-based financing programs
worldwide. Based in Switzerland, it has over 30 years of successful experience in the field.
How Can Supply Chain Finance Mitigate the Effects of Inflation and Rising Interest
Rates?
In March 2022, the Consumer Price Index in the US increased by 8.5% year-on-year, reflecting the
biggest annual increase since 1981 and being primarily impacted by increasing energy costs, food
and housing. To curb the development, the Federal Reserve announced on March 16th the first
raise in interest rates since 2018 with six more increases planned throughout the year. However,
with US’s ban on energy imported from Russia which tightens the supply of oil and further drives
up the energy prices, the inflation is not expected to come down for several months. Whilst the
situation puts increased pressure on companies by increasing input prices and cost of financing,
supply chain finance can offer companies ways to mitigate the effects by releasing liquidity trapped
in their supply chain and, if properly structured, unlocking off-balance sheet benefits for suppliers
and buyers, hence improving financial metrics, and creating a lower dependence on debt versus
traditional borrowing at higher interest.
To learn more about GSCF Group, please contact us.
This Newsletter has been prepared by GSCF´s research team based on publicly available information. GSCF cannot guarantee that such information is accurate and complete and expressly disclaims liability for errors and omissions in the content of this Newsletter