Global economy prompts repayment fears for MENA traders: HSBC

Uncertainty over the global economy is increasingly prompting Middle Eastern companies to use financial instruments which offset the risk of non-payment by foreign trade partners, HSBC's regional commercial banking head said.

In Saudi Arabia, 42 percent of exporters believe there will be an increase in buyers failing to settle trade transactions in coming months, with 30 percent of importers expecting more suppliers to fail to deliver goods, according to the bank's Global Connections Report, released on Monday.

Meanwhile, 53 percent of Egyptian businesses surveyed for the report cited payment defaults and 42 percent mentioned supplier failures as barriers to future trade growth.

However, trade in the region is continuing to grow; 94 percent of Saudi firms expect their trade volumes to expand or stay steady in the next six months. So companies are increasingly interested in instruments that limit risks, such as letters of credit and export credit insurance, HSBC said.

"I think this is a reflection of the economic situation out there, and the desire to find mitigants to make sure people can continue to take advantage of the growth in trade flows and ensure they are protected against payment risk," Tim Reid, HSBC's regional head of commercial banking, told reporters.

"The message is one of confidence in trade but a slight underlying concern that they need to tread carefully, given the concern around the ability of some of the trading partners to meet their obligations."

Many countries in the Middle East and North Africa have seen their economies disrupted by political turmoil in the past two years. While there may continue to be some disruption in the short term, the longer-term outlook is encouraging, HSBC's report said, predicting Egypt would eventually record annual export growth of between 12 and 15 percent.

"We have no doubt about the medium- to long-term potential for Egypt to grow," Reid said.

(Reporting by David French; Editing by Andrew Torchia)