The credit demand of companies in the Eurozone continued its decline in the fourth quarter of 2023, according to the results of the Bank Lending Survey prepared by the European Central Bank (ECB) with the participation of 157 banks in the Eurozone.
The report reveals that the credit demand from companies in the Eurozone decreased in the final quarter of the previous year, with a forecast indicating a slight increase in demand in the first quarter of the current year. The report also noted a decline in the demand for housing and consumer loans during the same period.
The evaluation in the ECB’s report stated, “The decline in demand across credit categories was influenced by the overall level of interest rates. Additionally, the decrease in fixed investments reduced corporate credit demand, while weakening consumer confidence and expectations in the housing market lowered household credit demand.”
For the first quarter of this year, a slight increase in corporate credit requests and household mortgage loan demands, the first since the beginning of 2022, is anticipated. However, due to high-interest rates and uncertainty, a further decrease in consumer loan demand is projected.
In a report released in October 2023 concerning the third quarter of the year, the ECB had previously mentioned a decline in the net credit demand of households and companies in the Eurozone, attributing it to concerns about high borrowing costs and economic outlook.
Interest Rate Hike for Inflation Control
In its efforts to combat inflation, the ECB raised the refinancing rate from 2.50% at the end of 2022 to 3% in its first meeting of 2023, a 50 basis points increase. The ECB continued with interest rate hikes throughout the year, reaching 4.50% in its September 2023 meeting, maintaining this level in the subsequent October and December meetings.
The annual inflation rate in the Eurozone, which was 8.6% in January 2023, decreased to 2.9% in December 2023. The ECB aims for a 2% inflation rate throughout the Eurozone for a healthy economy.
The ECB’s next meeting is scheduled for January 25, Thursday. Analysts predict that the Bank is unlikely to make changes to its key interest rates, similar to the October and December meetings.
source: aa.com.tr / prepared by Melisa Beğiç