The European economy is slowing down, and the impact on the performance of small and medium-sized enterprises (SMEs) is best seen by monitoring exports. CEVES economist Lazar Ivanović says that based on data from the first four months of this year, we cannot say that there has been an increase in the physical volume of exports on an annual basis. „However, what is interesting is that high exports to Russia have been recorded, which shows that our companies are using the global situation to do business in this country, although there is a great geopolitical risk given the Western sanctions,“ said Ivanović as a guest on Bloomberg Adria.
Ivanović also explains that SME investments are low, and investments in the green transition are even lower. “The domestic SME sector still lags behind European companies when it comes to the green transition. The data we collected from the companies themselves is also not encouraging, which is that this year they plan to invest even less in green technologies than they did in previous years,“ says Ivanović.
According to him, the tightening of monetary policy has also affected companies„ investments in general. “The increase in interest rates in the fight against inflation has already affected interest rates for newly approved business loans in euros and dinar loans indexed in euros, which together make up 98 percent of business loans; interest rates have tripled since August last year, amounting to 6.14 percent, which is the highest amount since 2014," explains the CEVES economist.
He adds that prices are still rising by about one percent per month, and that's without considering the increase in electricity prices. „And the desired annual growth is two to three percent. Therefore, we still cannot say with certainty that we have defeated inflation, which is very harmful to investments. This effect of rising interest rates on SME investments has been very strong. Borrowing for investments nominally fell by 17 percent in 2022 compared to 2021. And considering the inflation rate, we can say that investments, at least the part financed by borrowing, are lower in real terms by up to 30 to 40 percent. If we look at the first four months of this year, investment loans are 24 percent lower compared to last year and even 28 percent lower compared to 2021,“ explains Ivanović.
Watch the full guest appearance at the following link.
