The effects of the pandemic and inflation crisis on Spanish corporates’ funding gap

The effects of the pandemic and inflation crisis on Spanish corporates’ funding gap

Corporate funding

Fecha: mayo 2024

Borja Gambau Suelves and Montaña González Broncano

SEFO, Spanish and International Economic & Financial Outlook, V. 13 N.º3 (May 2024)

Recent financial markets volatility, derived from the economic crises and the transition underway towards a more resilient, digital and green economy, has brought about significant changes in the supply and demand for credit. These changes have disproportionately affected SMEs and micro enterprises, as they are more vulnerable to structural failures in the credit market, which have been aggravated by the prevailing situation. Specifically, SMEs’ financing needs have increased, shaped by the transformation of the productive model, which has translated into growth in demand for bank loans and for other types of financing. However, these needs have come up against greater financing constraints as a result of a range of factors, including the uptick in interest rates to curb inflation, driving growth in the cost of financing and, with it, in the incidences of loan rejections and discouraged borrowers. As a result, the estimated shortfall in SME financing has increased to between 22.5 billion euros (per the SME initiative methodology) and 36.9 billion euros (per the fi-compass methodology) in 2023 – between 1.5% and 2.5% of Spanish GDP in 2023, respectively. These figures indicate that the average funding gap increased by 58% between 2019 and 2023, and by 76% between 2020 and 2023. Within this context, public financial instruments, both at the national and regional level, could serve as a key economic policy tool for lending financial support to the productive sector at a time of heightened uncertainty.

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