The default rate of banks could be before the end of the year at around 5% or 7% -currently at 4.79% – and, in the case of corporate loans, could reach 10% , between double and triple that in 2009, due to the effects of the COVID-19 pandemic.
According to a study by the consulting firm Bain & Company, the expected drop in GDP (between 9.5% and 12.4% according to the latest estimates by the Bank of Spain) will cause up to three times more delinquent credit at the end of the year than in 2009.
The economic downturn derived from the coronavirus pandemic will negatively affect banks’ liquidity, delinquency levels will increase and deposit levels will decrease, while the demand for loans by individuals and companies to pay obligations or sustain living standards and business activity.
Given this, the study indicates, some entities are already taking some measures, such as the marginal increase in the deposit rate to generate liquidity, beyond that provided by the European Central Bank.
From the consultancy they clarify that the foreseeable recession in which Spain will enter is different from that of 2008, since although the total Spanish debt is now similar, in relative terms, to that of 2008, around 230% of GDP, now the Public sector debt represents 101% of GDP, compared to 40% in 2008.
Furthermore, growth in the global economy of more than 5% was expected in 2008, while the outlook for 2020 before the onset of the health crisis was already of global growth of less than 3%, with some countries on the brink of recession, as was the case in Germany, with a negative GDP of 0.1% in the third quarter of 2019.