According to data from the Observatoire du crédit aux sociétés non financières, Belgium has seen a decline in the growth of credit granted to non-financial corporations by resident banks. In June 2023, the annual growth rate stood at 4.1%, down from 4.7% in March. This shift is attributed to reduced credit issuance for both short and long-term loans, although medium-term credit issuance has returned to positive territory.
Specifically, short-term loan growth (less than one year) dropped to 5.3% in June, down from 9.0% the previous quarter. Medium-term loans (one to five years) registered a growth rate of 2.6% (compared to -4.8% in March), and long-term loans (over five years) grew at 4.0%, down from 5.1% in the previous quarter. During Q2 2023, net credit issuance was positive, with flows amounting to 1.5 billion euros from April to June, accounting for seasonal effects.
Overall, interest rates applied to new bank loans have increased. Long-term loans to businesses, in particular, saw a rise in rates, with an average interest rate of 3.99%, up by 8 basis points. Short-term loans, typically aligned with money market rates, saw an increase to 5.07%, a 59 basis point rise from the previous quarter. Moreover, loans exceeding one million euros experienced a 63 basis point increase, reaching 5.03%. Medium-term loans between one and five years rose by 28 basis points, landing at 4.67%.
The criteria for granting loans to businesses remained largely unchanged in Belgium during Q2 2023, according to four major Belgian banks surveyed. Their risk tolerance remained steady, although they expressed slightly increased concerns regarding sector-specific or company-specific risks. Additionally, these banks reported a decrease in credit demand compared to the first quarter, attributed to interest rates and reduced financing needs for investments, inventory management, and working capital.
Looking ahead to the third quarter of 2023, Belgian banks anticipate a slight tightening of credit criteria and further decreased demand for loans, especially among small and medium-sized enterprises (SMEs). However, the overall assessment of credit conditions by non-financial corporations remained stable compared to the previous quarter.
In the broader Eurozone, credit issuance to businesses also decreased in Q2 2023. On average, the annual growth rate stood at 3.0% in June, down from 5.2% in March. Positive growth rates were recorded in most Eurozone member states, except Italy, Portugal, and Spain. Eurozone banks reported a tightening of credit criteria for businesses during this period, along with a decline in demand, primarily due to interest rates and reduced financing needs for investments.
Looking forward to the third quarter of 2023, Eurozone banks expect further tightening of credit criteria and a continued decrease in demand for loans. These trends are driven by the current economic conditions, including interest rates and investment needs.