- New business loans up 2.6% in fourth quarter of 2016
- Increase driven by the expectation of rising borrowing costs, but businesses remain reluctant to invest
- KfW Research expects business lending to continue rising moderately in the first half of 2017 but flatten out again towards the middle of the year
Frankfurt am Main, 25-Apr-2017 — /EuropaWire/ — Estimates by KfW Research indicate that new lending from banks to businesses and self-employed persons rose by 2.6% in the final quarter of 2016 compared with the same period in the previous year. Growth rates are likely to be positive in the first half of 2017 as well. But a strong recovery is not to be expected, as shown by the current KfW Credit Market Outlook. On the contrary: the tailwind in the credit market will likely abate from the middle of the year as it is driven by the expectation of rising borrowing costs and not by accelerating business investment.
Adjusted for prices, business investment declined for the third time in a row in the final quarter of 2016 and thus failed to contribute to recent growth in the credit market. That growth is rather due to businesses’ expectations of borro-wing costs rising in Germany in the medium term. Businesses appear to be meeting their foreseeable funding needs sooner rather than later. The interest rate turnaround in the USA and speculation over a monetary policy trend rever-sal in the euro area on the back of a decreasing risk of deflation appear to be having an impact.
“Investment momentum remains subdued even though businesses are confi-dent, the economy is doing well, funding conditions are outstanding and busi-nesses are increasingly operating at capacity”, said Dr Jörg Zeuner, Chief Economist of KfW Group. “Extraordinary political risks, especially the uncertain-ty over future economic relations with important partners such as the USA and the UK, are making it harder for businesses to plan in the long term and making them more reluctant to invest. I do not believe that new business lending this year will be able to finally break out of the sideways movement we have obser-ved since 2011.”
KfW Research calculates the KfW Credit Market Outlook exclusively for the German business newspaper Handelsblatt. The current edition is available at
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