BY Richard Summerfield
2015 is likely to be the year that business lending grows and mortgage lending reaches an all time high in the eurozone, according to EY. In its report, 'EY Eurozone Forecast March', the firm notes that the wider eurozone is expected to be woken from its four-year slumber.
Business, consumer and residential mortgage lending are all expected to increase in 2015 for the first time since the dark days of the 2008 credit crunch. Much of this return to growth will be built on the boost that sliding oil prices have provided to much of the eurozone. Falling oil prices have had a positive effect on both consumer spending and appetites for credit.
EY estimates that business loans, which have decreased by €551bn since 2008, will increase by €53bn, or 1.2 percent, in 2015 - the first increase in lending since 2011. In 2016, business lending is expected to climb by €184bn. By the same token, EY forecasts that consumer credit lending will increase by 1.6 percent this year, reaching €573bn. Residential mortgage loans will also increase by around 1.9 percent in 2015.
Andy Baldwin, EY’s financial services leader for Europe, the Middle East, India and Africa (EMEIA), says “It’s taken six years to create the conditions to kick start growth in the Eurozone, but all the levers you can pull to stimulate demand have now been pulled, and there’s the additional stimulus of lower energy prices. So, if we don’t see growth in 2015 and 2016, we’ll have to conclude there are much more fundamental supply side issues to tackle."
EY does not believe that the ECB’s program of quantitative easing has yet had a lasting impact on the eurozone’s economy. As Mr Baldwin notes “The ECB’s QE program cannot take the credit for the improved outlook in lending, which is much more closely linked to cheap energy prices. And QE is a double edged sword - this level of economic stimulation is set to have a distinctly mixed effect on financial services. Investment banks and asset managers will benefit in the short term, but retail banks will find their profit margins squeezed, and insurers are facing an extra two years at least of punishingly low interest rates.”
Report: EY Eurozone Forecast
