Businesses, default rate returns to growth in 2023

The effects on entrepreneurship and on Italian SMEs of the high level of interest rates, confirmed by the ECB also in recent months, associated with a slowly recovering global economy after the years of the pandemic and the geopolitical variables of conflicts in act. On the credit risk front, after a long period dthe decline in default rates, starting from 2022 there was a reversal of the trend which led to a increase in the average default rate of Italian companiesalbeit attenuated over the course of 2023. Nonetheless, on the credit front there was an increase in the number of loans in 2023 compared to the previous year.

Businesses, rising default rate

These are some of the findings that emerged from the Business Observatory created by CRIF, which periodically provides an accurate snapshot of the main indicators relating to the credit performance of a sample of over 2.5 million businesses, made up of individual businesses, partnerships and Italian joint-stock companies, developed on the basis of the information assets of the EURISC Credit Information.

After a long period of decline of the default rates of companies, which have registered a minimum point at the end of 2021, heavily influenced by government support measures in response to the COVID-19 pandemic, in December 2023 the average default rate of Italian companies rose to 2.39%. More precisely, 2023 ends with a default rate of 2.49% for individual businesses, 1.62% for partnerships and 2.58% for joint-stock companies. The trend reversal had already been noticed starting from 2022, with a trend of slow but constant growth. For 2024, CRIF Ratings, a credit rating agency authorized by ESMA, predicts that the default rate of joint-stock companies may increase and settle at around 3.5%.

The CRIF numbers

“Default rate growth will be affected by the persistence of a context of instability at a global level and by a still fragile domestic economic scenario. In particular, the relevant factors that could have an impact on the riskiness of companies are the evolution of tensions in the Middle East, the decisions by central banks in terms of monetary policy in which the first signs of possible easing can be glimpsed in the coming months, the outcome of the elections in the United States and the European Parliament, the economic and political trajectory of China” – comments Luca D'Amico, CEO of CRIF Ratings.

On the credit front, in 2023 the number of loans granted to businesses grew by 5.4% compared to the previous year, while the growth in the amount financed was more limited, standing at 1.7%. These trends highlight a greater need for businesses for credit compared to 2022, but with a lower propensity to borrow large amounts, behavior attributable to the greater burdensomeness of the debt.

Increase credit disbursed

The analysis highlights that the intensity of the rise in interest rates ddefaults were not homogeneous at sector level. While the most resilient sectors have shown some stability, others have shown a strong upward trend with increases of around one percentage point over the last 18 months. Looking at joint-stock companies, among the sectors that have already exceeded the threshold of 3% average default rate at the end of 2023, the following stand out in particular: Leisure (3.86%), Transport and Logistics (3.64%), Construction (3.20%) and Motor Vehicle Trade (3.07%).