In an attempt to cool the inflationary pressure, the increase of rates of interest decided by the ECB in this second part of the year – to which we will certainly have to add the new increase that will be introduced on 15 December – will lead to an increase in the charges on loans to about 15 billion euros. This was reported by the CGIA Research Office.
This estimate was “constructed” by assuming an average increase in interest rates of 2 per cent between 2022 and 2023. This increase was applied in the light of the fact that this year the average value of the ECB rate (weighted by days) will be around 0.6 per cent; as a result of the measures which raised it between last July and the beginning of November zero to two percent. Therefore, by applying an average interest increase rate of 2 per cent to the 749.2 billion in outstanding loans granted to businesses as at 30 September last, next year the latter will suffer an increase in the cost of money equal to 14.9 billion of Euro.
The most affected regions
The regions most penalized by this upward adjustment of rates will be those where the productive activities who make use of the help of credit institutions; namely Lombardy (+4.33 billion euros), Lazio and Emilia Romagna (both with +1.57 billion), Veneto (+1.52 billion) and Piedmont (+1 billion). Almost 2/3 of the 15 billion higher cost of money that companies will have to bear next year will be attributable to Northern businesses.
Interest rate hikes will also have negative effects on household spending, business investment and the cost of our public debt. The new rate hikes, therefore, could help curb economic growth next year in Italy it should settle at 0.3/0.4 per cent. A threshold which, most likely, will also have negative repercussions on employment.
The loan crunch
The growing trend of rates expected in 2023 will also cause another negative effect. According to the latest estimates made by E&Y, overall bank lending in Italy is set to fall by 1.8 per cent. To this contraction will contribute, albeit in different proportions, all credit segments. Mortgage loans, for example, by 0.3 percent, consumer credit by 1.5 percent and loans to businesses by as much as 2.8 percent. A contraction that, unfortunately, will affect all of Europe.