Credit demand of companies in the euro area is expected to decrease

In the Bank Credit Survey report prepared by the European Central Bank (ECB), it was stated that the loan demand of companies in the Euro Zone decreased in the last quarter of last year and will decrease further in the first quarter.

The ECB has published a report on the results of the Bank Credit Survey, in which 151 banks in the Eurozone participated.

In the report, it was stated that the loan demand of companies in the Euro Zone decreased in the last quarter of last year and that it will decrease further in the first quarter of the year due to rising borrowing costs.

The ECB cited “increasing interest rates in the Euro Zone” as the reason for the decrease in demand.

26 percent of banks participating in the ECB’s survey stated that they made the terms of loans given to companies more stringent in the last quarter of last year. This resulted in the most curtailment of loans since the 2011 debt crisis.

“The increase in risk perceptions regarding the economic outlook and branch or company-specific situation, decreased risk tolerance levels of banks and rising funding costs continued to tighten credit standards for loans to companies in the euro area,” the ECB report said. it was said.

While 74 percent of the banks surveyed reported a decline in mortgage demand in the last quarter, the biggest decreases were seen in Germany and France.

“This points to the strong negative impact of recent interest rate hikes on housing loan demand and falling Consumer Confidence,” the ECB’s report said.

Fighting inflation

The ECB is struggling with record inflation as a result of high power and food costs, as well as the resumption of economic activity after the Covid-19 pandemic.

In an effort with high inflation, the ECB has increased interest rates four times in a row since July 2022.

On the other hand, the meeting of the monetary policy committee of the ECB, which will be held on Thursday, is in the focus of investors.

ECB Leader Christine Lagarde pointed to more rate hikes in the new year.

According to the European Statistics Office (Eurostat), annual inflation in the Eurozone, which was 10.1 percent in November, declined to 9.2 percent in December. Inflation in the region reached double digits late last year.

Inflation data for January will be announced tomorrow. The ECB targets 2 percent inflation for the entire Eurozone for a healthy economy.

ECB’s Bank Credit Survey, which provides information about the credit conditions of banks in the Euro Zone, is conducted 4 times a year. The last survey was conducted in the middle of 12 December-10 January.