News from 2021-12-30 / KfW Research
KfW Credit Market Outlook December 2021
Omicron is overshadowing the recovery in the credit market
The slump in the German credit market has bottomed out. That is good news at the end of the year, although it should be regarded with some caution. After all, in the third quarter banks again extended 7.6% fewer new loans than in the previous year.
But lending growth could turn positive again as early as in the final quarter. However, much of the improvement is attributable to the elimination of the negative base effect. Besides, businesses’ need for external finance is also likely to increase slightly more strongly than anticipated. Persistent bottlenecks are contributing to this, making inputs and investment projects more expensive. This increases the associated funding requirements.
The emergence of Omicron has significantly disrupted the economic conditions again. We expect increased volatility in lending business and currently do not anticipate a sustained strong recovery of the credit market until the second half of the year.
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