The International Chamber of Commerce (ICC), along with partners Global Credit Data (GCD) and Boston Consulting Group (BCG), has released its 2023 Trade Register report, reaffirming that credit risk in trade, supply chain and export finance remains stable despite times of ongoing global macroeconomic uncertainty.
Prior to the COVID-19 pandemic, strong growth in global trade, which typically exceeded the rate of GDP growth was the prevailing trend. Even at the height of the pandemic, trade remained relatively resilient with a powerful rebound in 2021 as the global economy reopened and economic activity picked up. Since 2022, a different trajectory has emerged with slower trade growth due to the disruption to supply chains in, for example the energy and agricultural sectors, as a result of the Russia-Ukraine war, and broader geopolitical tensions, elevated global inflation and high interest rates, among other causes. BCG expects global goods trade to fall by 2% from 2022 to 2023 on a nominal basis, before returning to modest growth for the remainder of the decade.
Despite these shifts, the role of trade, as well as trade and supply chain finance products, is more important than ever. As the geopolitical and economic environment becomes more challenging, access to liquidity and risk mitigation is increasingly valued. Fortunately for banks, corporates and investors, the ICC Trade Register once again demonstrates that even in these circumstances, trade, supply chain and export finance products remained low risk in 2022 compared to other asset classes.
The ICC Trade Register continues to be the global authoritative source of default rates in trade, supply chain and export finance. Its data set represents nearly a quarter of all global trade finance transactions. While this year’s Trade Register showed increased default rates across all asset classes compared to 2021, these were in line with longer-term trends. In addition, as anticipated, these increases werelargely concentrated in specific regions and linked to known commercial, geopolitical, and macroeconomic events.
ICC Secretary General John W.H. Denton AO said: “Since the pandemic, we have been waiting to see whether the trade finance market finally shows signs of weakness as it battles the delayed impacts of the pandemic. However, this seems to simply not be the case. While default rates are clearly increasing in a less geopolitically-stable world, trade, supply chain and export finance assets continue to be resilient in the long-term – which should attract banks and investors to continue support for this valuable asset class”.
As opposed to previous years, ICC no longer publishes quantitative credit risk data in its public report to reward and acknowledge the significant efforts of participating Member Banks. Detailed findings, analysis and data tables are available for purchase.
For more information on the ICC Trade Register 2023, including any questions on participation and report pricing, please reach out to: Andrew Wilson and Tomasch Kubiak.
