Consequences of the increase interest ratesbut also the heightened uncertainty created by financial turmoil and the domestic political scene, a measure of businesses and households that are holding back demand for loans despite the high liquidity that exists in the economy through banks. Rising value of money slows down initiatives to borrowingnot only by households, but mainly by businesses that are unwilling to borrow, making large payments or even early repayments of existing debts.

Repayment of 25 billion

“Anyone who may choose not to be exposed to lending,” typical corporate banking executives say, and according to banks, loan repayments broke the counters in the first quarter of the year, surpassing even the high repayment levels seen in 2022 and approaching 25 billion euros, with a total of new payments of 33 billion euros. “2023 is off to a rocky start and I wouldn’t be surprised if we end up with negative credit growth,” typical banking executives note, noting that while no major investment project has been canceled so far, “as money gets more expensive , some investment projects will not be fired.” “The market looks extremely small in the first quarter,” they stress, in effect anticipating that restrictive monetary policy is starting to show its teeth in the real economy.

High payouts compensate According to “K”, new funding and, according to knowledgeable bank executives, they are creating reflections on achieving the substantial credit expansion targets that banks have set for 2023 in the midst of a volatile political scene created by the call for elections. The reasons include:

1. In rising interest rates, which increases the cost of borrowing for businesses, especially small and medium-sized businesses that do not have access to cheap Recovery Fund loans. Business lending rates after the introduction of euribor rose to 3%, today they start at 5% for healthy small and medium businesses and rise to 8% for small businesses. A company is considered overburdened if its debt exceeds EBITDA by 6 times, corporate banking executives explain, but if the cost of borrowing has risen by 3 times, then this criterion makes it difficult for a significant part of companies to access financing.

Tight monetary policy is starting to show its teeth in the real economy.

2. In the decline in raw material prices in the first quarter of the year compared to the corresponding period last year, which curbed the need for working capital. The phenomenon of small businesses closing credit lines they are not using, limiting their exposure to borrowing, is strong.

3. In the high liquidity that exists in key sectors of the economy, such as energy and especially shipping, which leads to the closure of existing credit positions even with early repayment of the loan. On the contrary, this phenomenon is not observed in tourism, since liquidity is used to meet the needs of the new year.

4. When repaying loans issued during the pandemic crisis, mainly through the Hellenic Development Bank, which are gradually closing the 5-year cycle and starting to be repaid en masse so as not to bear the burden of increased servicing costs. “This is a significant amount of loans that cannot be refinanced” and which are a key category of repayment, the bank’s executives explain.

5. In financial unrest, which, if they continue, may tighten the already stringent credit criteria on the part of banks, and, finally, in political uncertainty in our country, which slows down investment moods mainly on the part of business. “The psychology recorded in the 1st quarter has nothing to do with the last quarter,” typical bank executives note from communication with business executives, noting that recent market turmoil is causing distrust in the future, which is increasing in our country, with the main question is whether the elections will show a stable government.

Unique Output

A stable source of channeling liquidity for 2023 is the Recovery Fund, which continues to attract resources but is mainly aimed at large companies with investment plans of more than 5 or 10 million euros, executives of the respective banks say, stressing that experience shows that the program is burdensome for small businesses , which basically refers to the law on development or to the NSFR, which has just started and its results are not yet visible.

Mortgage payments are on the rise

Estimates of further increases in interest rates show “containment” on the part of the Central Bank at 3.30% until the end of the year and always subject to pacification of inflation. This is a more moderate estimate than the forecast for interest rates to rise to 4% at the end of 2023, which was in effect about a month ago, that is, before the crisis in US banks and the collapse of Credit Suisse. However, the consequences are already visible in the economy, and the question is whether they will take hold as a dominant trend in the coming months. In addition to the aversion to borrowing, there is strong concern about the rise in bad loans, mostly from households.

Concern dominated a meeting Finance Minister Christos Staikouras held with bank executives last week, and while no new bad loans are in sight yet, this cannot be ruled out in the future. in the near future due to a reduction in disposable income caused by persistent inflation. The common ground between banks and the Treasury was concern about the burden on households due to the significant increase in interest rates, which has led to an increase in mortgage payments by an average of 150-200 euros per month since July last year, when interest rates began to rise. ECB rates. Characteristically, for a loan of 100,000 euros with a margin of 2.5% (the final interest rate today is 5.5%) and a maturity of 20 years, the installment last year was 535 euros per month this time, and today it is 695 euros. Euro.