The Bank of Greece’s (BoG) data for the first quarter of the year confirm the recovery in corporate financing, which will support credit expansion in 2024, as the net flow of financing moved into positive territory in the order of 333 million euros.
The net flow of financing captures new loan disbursements after repayments of existing debt, and the positive sign in the first quarter is a consequence of the increase in borrowing of €1.9 billion in March, which raised the rate of credit expansion to businesses to 8%.
Loans to enterprises amounted to €76.4 bn, of which €67.4 bn are loans to industry, trade, tourism, construction, etc. – i.e. non-financial businesses (NFC) – and a further €8.9 bn are loans to insurance companies. A further €4.5 billion are loans to professionals, farmers and sole traders, which make up a small proportion of business loans. In addition to the high cost of money resulting from the rise in interest rates, the reluctance of sole proprietors and especially the self-employed to borrow is also attributed to widespread tax evasion and undeclared income, with the result that their low income status does not allow them access to bank loans.
According to the BoG’s figures, business lending, with a focus on small and medium-sized enterprises (SME), is the main driver of the acceleration in financing, which is currently being boosted by loans from the Recovery and Resilience Fund (RRF), which ensure low financing costs. According to the banks’ estimates, the rate of credit expansion to businesses will rise to an average of 5% over the three years 2024-2026, a period that coincides with the end of the RRF, whose resources should have been absorbed by August 2026.
On the contrary, loans to households continued to show a negative net financing flow both in March (-€21 million) and in the first quarter (-€201 million). The big problem is mortgages, whose balances are constantly shrinking as repayments exceed new disbursements, resulting in a negative flow of €292 million at the end of the first quarter.
Original Story: Ekathimerini | Author: Evgenia Tzortzi
Edition: Prime Yield