May 29, 2020
E-mail from Lender & Spender
On 6 May, the European Commission published an analysis outlining the first contours of the expected impact of corona measures on the economies of the Member States. The findings of the analysis for the Netherlands can be used to give an idea of the possible consequences of the crisis on the loan portfolio of Lender & Spender.
European Commission expectations
When COVID-19 remains manageable and Member States can continue to ease the measures, the European Commission expects economic activity to recover from the summer months. Consumers are currently spending less due to the corona measures. Rapid relief is expected, however, if the measures are eased. Full recovery will not materialize in the short term: Consumers will save more in the near future due to uncertainty and because some of the measures will be maintained for longer, less will be spent on holidays, meals and other outings for a longer period of time. For the EU as a whole, the European Commission expects the level of the economy to be just below the level of 2019 by the end of 2021.
For the Netherlands, it is also expected that consumer spending will recover from the summer. In addition, the impact on the labor market will become clearer in the coming months. Unemployment is expected to increase in particular in severely affected sectors such as aviation, hospitality, events and travel, and among workers with flexible and temporary contracts.
Influence on demand for loans
Since the start of the crisis, we have seen a decline in demand for loans. This development is in line with the European Commission’s observation that consumers currently spend less. The first few cautious signs of recovery have emerged in recent weeks and we expect this recovery to pick up further from the summer. Until then, however, due to declining demand, it may occasionally happen that no investment opportunities will be available temporarily.
Influence on the loan portfolio
Because unemployment is affecting many sectors more severely, Corona’s influence on the loan portfolio depends on the sectors where borrowers are active. We are currently conducting this analysis. The first picture emerging from this shows that only a small proportion of borrowers are employed in the severely affected sectors. The full results of the analysis will be shared shortly.
In addition, the rise in unemployment mainly affects employees with a flexible or temporary employment contract. Borrowers have an open-ended employment contract at the start of the loan and therefore fall outside this category.
This picture is confirmed by the recent developments in the portfolio: Payment arrears are stable and to date (only) 3 corona preventive payment schemes have been agreed. In order to continuously provide an up-to-date picture of preventive payment schemes, a graph is included on the statistics page that shows the latest state of affairs.