Daily Management Review

Bundesbank: There's no zombie companies in Germany


12/18/2017


There is no evidence of an increase in the share of "zombie companies" in Germany, despite the low cost of loans. The loans reduce incentives for banks to stop lending to customers who are already in arrears, the Bundesbank said.



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pexels
The German central bank has long opposed the ultra-soft policy of the ECB with low interest rates and a program of massive bond buying, citing the risk that it would artificially sustain life in failed companies.

However, the Central Bank of Germany did not see signs that something like this is happening inside the country. The share of German firms with negative cash flow was only 2.2% in 2015, has slightly increased from 1.4% before the crisis in 2007.

"The share of zombie companies among all companies in Germany is small, it did not grow during the period of low interest rates," the Bundesbank's monthly report says.

The regulator also noted that Germany's economy should strengthen its already lively momentum in the winter months, reaffirming its view that the German economy could slow down after next year.

Earlier it was reported that the Bundesbank raised the forecasts of the growth of the largest economy of Europe until 2019. The Central Bank of Germany expects that the growth momentum will remain strong in the coming years, but in the medium term it will weaken.

According to the updated forecasts of the Bundesbank, Germany's GDP in 2017 will grow by 2.6%, and not by 1.9%, as expected earlier. The forecast for 2018 was increased from 1.7% to 2.5%, in 2019 - from 1.6% to 1.7%. In 2020, it is expected that economic growth will slow to 1.5%.

"We will see a sustained high base rate of economic growth, not only in the last quarter of 2017 and in the first quarter of 2018, but also during the remainder of 2018," said Jens Weidmann, head of the Bundesbank. "The opportunities for further growth are limited primarily by the strong use of production capacity and, in particular, a shortage of labor. "

source: dw.de






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