Uncertain future

Interest No Incentive to Borrow

  • Why it matters

    Why it matters

    As long as US trade policies remain uncertain and the consequences of the Brexit are unknown, European businesses remain reluctant to invest; this means they are also reluctant to loan money to invest.

  • Facts

    Facts

    • The KfW is backed by the German state and promotes private individuals as well as businesses, cities, municipalities and non-profit and social organizations in Germany.
    • Reluctance to borrow is putting intense pressure on lenders. The average cost of a German loan in January was 1.7 percent, a new record low.
    • Currently loans for housing and commercial property are the most dynamic area of the entire credit business in Germany.
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    Audio

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Hochofen
Not setting loans alight: Despite the best intentions of the ECB and EU central banks, German businesses remain conservative when it comes to seeking new credit. Source: Peter Steffen / DPA

In Germany, the mood at companies is excellent, the economy robust and capacities fully utilized. Despite this, the state-backed development bank KfW is predicting that demand for new loans by businesses will grow only moderately in 2017.

“Investment dynamics remain poor,” says KfW’s chief economist Jörg Zeuner. And this is because extraordinary political risks make it difficult for businesses to plan long-term. Why? Primarily it’s about future economic relationships to partners like the USA or Great Britain.

Businesses are still awaiting details of US trade policy under President Donald Trump. The Brexit has also caused uncertainty and as of this week, British politicians decided that in June their country will elect a new parliament, which will then decide on what course to take in negotiations for leaving the European Union.

 

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