In April, companies borrowed a record 10 billion kuna

During April, companies in Croatia took out ten billion kuna in new loans for financing working capital or refinancing old loans, which is a record for new borrowing in the last five years, writes Večernji list on Tuesday, as reported by HINA.

The COVID-19 pandemic halted the operations of nearly one-fifth of companies, especially within sectors where social distancing measures have the most negative impact, causing their revenues to drop by more than 90% in the first month of quarantine. Due to the latent danger of reactivating the same or similar viruses, businesses operating in sectors that require close contact with clients will have to restructure their business models, emphasizes the Croatian National Bank in the section of the Financial Stability analysis that pertains to companies.

Unlike lending during 2019, when new loans predominated, primarily for working capital and with a stable share of new loans for investments, since the outbreak of the epidemic, there has been almost no new loans for investment activities. Between 85,000 and 100,000 legal entities with nearly 600,000 employees received state aid for job preservation in March, April, and June, among which more than 90% are micro-enterprises (companies with up to ten employees). The state allocated around 6 billion kuna for these aids.

The aids facilitated survival and adaptation of businesses in the short term, notes the CNB, warning that the prolonged provision of non-selective aids could keep companies with unsustainable business models in the market, thereby slowing the shift of resources towards healthy companies that should be the drivers of economic recovery.

Željko Lovrinčević, an analyst at the Economic Institute, believes that the demand for loans will be even greater as the moratorium on tax payments has also expired. The CNB observes that many companies have quickly adapted their business models by strengthening digitalization and relying on delivery channels to enable work and the sale of goods and services “remotely.” Meanwhile, some sectors have further profited, such as IT solution providers and courier services, writes Večernji list on Tuesday.

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