Warning against euro area credit growth
However, this prediction is not without caveats. Non-performing loans (NPLs) are expected to increase slightly, reaching 2.0% of total loans in 2024 and 2.3% in 2025 and 2026. Although these numbers represent an increase, they are still well below the 8.4% peak during the euro area debt era. Crisis of 2013.
Nigel Morden, EY EMEIA Banking and Capital Markets Leader, said: “For the first time in four years, we expect no contraction in lending in any lending category in 2025 as GDP growth accelerates across all major markets.” . After years of low lending growth, European banks are poised to play a key role in supporting consumers and businesses across the region. ”
However, the recovery has not been uniform across the eurozone’s largest economies. Germany, currently the most challenged G7 economy, is projected to have a stagnant GDP growth rate of 0.0% in 2024, then to moderately increase to 0.9% in 2025 and 1.6% in 2026. In contrast, France is expected to achieve GDP growth of 1.2% in 2024. Meanwhile, Spain is expected to grow by 2.8% this year, leading the way.
Italy is typically a low-growth economy, with GDP growth expected to rise to 0.8% in 2024 and 1.1% in 2025. However, overall bank lending is expected to contract by 1.7% in 2024, before returning to growth in the following years.
The varying growth rates across lending categories and countries highlight the complex nature of the euro area’s economic recovery. Factors such as interest rate trends, inflation trends and sector-specific challenges continue to shape the environment.
Nigel Morden concludes: “This forecast presents an opportunity for companies to rebalance their corporate priorities. From 2025 onwards, we expect to see an increased emphasis on disruptive technology, innovation and sustainability.”
