Robust Trade Finance Volumes Despite Recession Fears - SocGen
(14 July 2023 – Global) Major trade and supply chain finance providers including Societe Generale (SocGen) are buoyant despite rising recession fears that could dent global trade growth.
The latest United Nations Conference on Trade and Development (UNCTAD) data reveals merchandise trade recovered by 1.9 percent in Q1 2023 following a dip in H2 2022 Euromoney reports.
Growth is anticipated to flat line in H2 2023 however as rising inflation and market uncertainty compound geopolitical tensions in Ukraine and the South China Sea.
SocGen anticipates companies active on international projects to underpin demand for guarantees and standby letters of credit to secure recurring trade corridors while the defence industry is also predicted to be dynamic.
“Cost has impacted demand for funded products. But demand for guarantees and standby letters of credit are solid, driven by corporate clients’ commitment to international projects and the needs of the energy transition and defence sectors. We see a strong demand from clients to work with them on sustainability-linked trade finance facilities as well as green guarantees” commented Societe Generale Head of Trade Services for Global Transaction and Payment Services, Marie-Laure Gastellu.
“The longer interest rates remain high, the more adverse the impact on trade finance for those players looking for funded trade finance, as the cost of funds will bear on the cost of debt and hence the profitability of companies. The less dynamic growth of the Chinese economy and the expected slowdown of the US economy are also likely to induce a cooldown in global demand” Gastellu added.