2015 to be a turning point in Eurozone lending, says EY

The weak economic recovery in the Eurozone in 2014 led to the third consecutive year of decline in corporate lending, consumer credit stagnation and maintenance of relatively low interest rates. But 2015 seems to be a turning point shows an EY report released on Tuesday and titled Eurozone Outlook for Financial Services (EOFS).

In 2015, lending will increase for the first time in the last four years and mortgage loans will reach a historic high in the Eurozone. According to EOSF, insurers still face low interest rates, but will benefit from an increased demand as the economy is gaining momentum, and the assets under management (AUM) already see an accelerated growth. However, although QE stimulates the economic recovery in the short term, which is much needed, and banks in the region are able to support this growth, the QE effects on the financial industry are not all positive.

“It took six years to create the conditions which to enable the growth re-launch in the Eurozone, and now there were driven all the levers to stimulate demand which could be operated; in addition to this there is also an extra boost which comes from lower energy prices. Therefore, if we don’t see growth in 2015 and 2016, we will have to consider that we are dealing with deeper problems related to the offer to be taken into account,” stated in a press release Andy Baldwin, EMEIA EY Financial Services Leader.

The report also shows that 2015 will be the first year since the 2008 financial crisis when lending will increase for all three segments – companies, consumption loans and mortgage loans. “In light of our expectation that consumer spending and house prices will pick up this year, we are projecting that consumer credit and mortgage loans will expand by 1.5 percent and 1.9 percent respectively in 2015,” reads EOSF. Also, according to the report, after contracting by 1.6 percent in 2014 (the third consecutive year of contraction), it is estimated a return to positive growth in business loans of 1.2 percent in 2015.

“We expect Eurozone GDP growth of 1.5 percent in 2015 and 1.8 percent in 2016. (…) Cheaper energy should boost household incomes by 2.3 percent in 2015, enabling consumer spending to accelerate,” also reads the report.

It is also expected for the weak recovery to hold back the ECB from achieving its inflation target of “close to 2 percent” both this year and next. EY expects inflation to pick up from 1.1 percent in 2016 to just 1.7 percent in 2019.

Staff