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Economic slowdown is affecting Germany's credit market

- New lending down 6% in first quarter
- Recovery not expected until second half

The economic slowdown and weak investment activity of the fourth quarter of 2012 has severely impacted on lending growth in Germany at the start of the year. In its current Credit Market Outlook KfW expects a demand-driven decline of 6% in new lending to enterprises and self-employed professionals for the first quarter of 2013 (against the previous year).

New lending had already contracted by 2.3% in the fourth quarter. The situation will remain bleak in spring as well even as the economy picks up because demand for credit, especially for investment loans, only responds to an economic turnaround with a time lag.

"When Germany's upswing stabilises and enterprises invest more, demand for bank loans will also increase again", said Dr Jörg Zeuner, Chief Economist of KfW Bankengruppe. "Since there are no apparent restrictions on the supply side and access to credit remains good in general, I expect the trend to reverse and lending to pick up from the middle of the year."

The economic weakness at the end of last year and the significant decline in long-term project financings recently had a restraining influence on lending growth. Despite high investment requirements, the volume of launched projects dropped significantly in 2012.

For enterprises in search of finance, access to credit continues to be very good. There are no signs that banks are significantly tightening their lending criteria. Funding conditions also provide no grounds for German banks to restrict their credit supply because enough liquidity is available.

This is not affected by the end of the flight of Southern European deposits to Germany either. The development of the Target2 balances since autumn of 2012 shows that capital flows have reversed. Even if this is a sign that the euro crisis is starting to abate, southern Europe continues to suffer from a credit crunch that has to be fought vigorously.

The current edition of the KfW Credit Market Outlook is available in the Internet at

Palmengartenstr. 5 - 9, 60325 Frankfurt
Kommunikation (KOM) Christine Volk
Tel. +49 (0)69 7431 3867, Fax: +49 (0)69 7431 3266,

Christine Volk | presseportal
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