EY Projects Eurozone Credit Growth to Hit 3.1% by 2025

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Considerations Regarding Credit Expansion in the Eurozone

While the outlook is generally optimistic, it comes with some warnings. Non-performing loans (NPLs) are projected to see a slight increase, climbing to 2.0% of total loans by 2024 and reaching 2.3% in 2025 and 2026. Despite this uptick, these percentages remain significantly lower than the peak of 8.4% observed during the eurozone debt crisis back in 2013.

According to Nigel Moden, the leader of Banking and Capital Markets at EY EMEIA, “For the first time in four years, we expect lending to grow across all categories in 2025, driven by a recovery in GDP growth across major markets. After years of minimal lending increases, banks in Europe are poised to play a vital role in supporting both consumers and businesses in the region.”

Nonetheless, the recovery is not consistent among the eurozone’s largest economies. Germany, which is currently struggling within the G7, is forecasted to experience stagnation in 2024 with a GDP growth rate of 0.0%. It is then expected to see modest upticks of 0.9% in 2025 and 1.6% in 2026. In contrast, France is anticipated to achieve 1.2% GDP growth in 2024, while Spain is set to lead with a projected growth of 2.8% this year.

Italy, traditionally known for slow economic growth, is expected to have a GDP growth rate of 0.8% in 2024, increasing to 1.1% in 2025. However, its overall bank lending is expected to decrease by 1.7% in 2024 before reverting to growth in the following years.

The differing rates of growth across various lending categories and nations highlight the complexities surrounding the eurozone’s economic recovery. Factors such as interest rate fluctuations, inflation trends, and industry-specific issues continue to impact the economic landscape.

In summary, Nigel Moden states: “This forecast presents a chance for companies to reassess their corporate strategies. We anticipate a greater emphasis on transformative technologies, innovation, and sustainability in 2025 and beyond.”