More and more companies are suffering from interest rate hikes. The credit insurer Allianz Trade warns against this. And it is SMEs in particular that are being hit the hardest, says credit risk director Johan Geeroms of Allianz Trade.
And interest rates will remain high for a while, BNR internal economist Han de Jong said today. For example, there would be at least two more rate hikes in the offing. And that worries Geeroms. “It will undoubtedly cause more pain,” he says. “Allianz has conducted a study around the world, which shows that companies are taking on more and more debt, despite rising deposit rates.”
“It will undoubtedly cause more pain”
Where the interest rate is currently still 3.5%, the two projected interest rate increases will each include a quarter of a percentage point, so that the interest rate will eventually be 4%. “As a result, the banks are obviously getting tougher and that’s not good for SMEs,” continues Geeroms. “There are so many factors that come into play at the same time. Think high inflation, high wages, raw materials that are going to rise sharply in 2022, you name it.’
Geeroms points out that they are now significantly down again, “but still higher than in 2019,” he says.
Problem
But what is the problem for SMEs? According to Geeroms, these companies are unable, like the big corporations, to pass on the higher input prices for the whole pound. “Obviously they want to maintain market share, but that comes at the expense of margin,” she explains. “Margins are lower, interest rates are higher and even the corona support often has to be repaid. Some loans will therefore have to be refinanced, which is too good.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
