Bank financing and interest rate forecasts for 2023

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What awaits us in 2023?, 2022 has been a year marked by a cycle change in monetary policies. This fact influences the forecasts for access to bank financing for this new financial year, since the interest rate increases carried out in 2022 have caused a contraction in the supply of loans to companies and threaten economic growth.

Despite the fact that there is some uncertainty about the economic future, in this scenario, inflation continues to be a critical data. A reduction in CPI rates may lead central banks to ease the rate of increase during 2023. We take a look at it all in more detail below.

Economic situation and expectations in Spain

The evolution of the Spanish economy has a considerable impact on bank loan forecasts. It has a direct relationship with the good performance of Spanish companies and their dependence on credit; as well as in the risk analysis carried out by the lending entities.

The current economic context in Europe is strongly marked by inflation. This macroeconomic data has been the protagonist throughout 2022.

In fact, as can be seen in the graph below, inflationary escalation began in early 2021, reaching its peak in July 2022 (with an interannual rate of 10.8%).

According to Bankinter's Analysis Department, inflation will continue to be a key figure for the future of the Spanish economy. However, they estimate reduction in price growth by 2023 and the year closes with an annual CPI rate of 4%. Inflation is moderating as a consequence of the deceleration of the energy component.

However, the rise in inflation has marked a cycle change in monetary policies. Both the United States Federal Reserve as the European Central Bank (like the Bank of England, the Bank of Norway and the Swiss Central Bank) have started a program of interest rate hikes.

Interest rate forecast

Although it is planned that the pace of rate hikes slows down during 2023, the price of money it will continue to be a critical indicator for the supply of bank loans.

As indicated by the Economic Bulletin of the Bank of Spain for the third quarter of 2022, the credit contraction already manifested itself during the first half of 2022. The rise in interest rates has reached the real economy and the tightening of financing conditions for companies and homes is a fact.

The Euribor has been located in December 2022 at 3,02%. In this way, it represents a rebound in the cost of financing of 3,52% with respect to December of the previous year. The official interest rates have been increased by 2.5% throughout 2022.

CaixaBank Research The 12-month Euribor is expected to close the 2023 financial year with a rate of 2.73%, which represents a slight decrease in current interest rates.

Euribor evolution and forecasts in the coming years (Source: CaixaBank Research).

Reduced economic activity

Interest rate rises bring with them a contraction of economic activity, as a direct result of a increase in the cost of credit for families and companies.

If we add to the difficulty of obtaining financing the reduction in sales margins (plus an increase in liquidity needs, as a result of greater customer collection problems), the economic situation may have negative consequences for the business fabric.

Despite the fact that some analysts estimate zero GDP growth in Spain for the year 2023, the OECD Economic Growth Outlook November 2022 They point to a rate of 1.3% in 2023 (versus a growth of 4.4% in 2022).

Forecast of bank loans in 2023

After analyzing the factors that have the greatest weight in the bank financing forecasts for 2023, we observe that inflationary pressure may ease and cause a small decrease in interest times.

However, the tightening of monetary policies, the interest rate hike and the high energy prices and the weak growth they are still present. The difficulty of accessing bank loans and the tightening of conditions have already become apparent in 2022 and no significant improvement is expected.

Although the figures for loans to companies have increased slightly at the end of 2022 (specifically, the data for November point to an increase of 1.8% with respect to the same month of 2021), a new rise in interest rates can drastically reduce the financing capacity.

The possible deterioration of the indicators that affect the granting of new loans is in the air; and the greatest risk for Spanish companies is a scenario of slowdown in economic activity.

In this situation, there are business financing solutions alternatives to the banking sector, with greater flexibility and agile processing.

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