Business sees glimmers of hope in cautious outlook
Small and Medium Enterprises (SMEs) have been facing a period of uncertainty, according to Kirill Tikhonov, Senior Vice President and Deputy Head of the Small and Medium Business Block at PSB. This uncertainty has been ongoing for the fourth month.
The Index of Business Activity for SMEs increased slightly from 50 points in July to 50.4 points in August. However, this modest increase does not fully reflect the complexities of the current business environment.
Investment activity among small businesses reached a minimum since the end of 2020, with only 16% of SME representatives planning to increase their investments – the lowest level since the end of 2018. Conversely, the share of SME representatives planning to reduce investments increased by 4 points to 10%, the highest level since mid-2021.
The overall index was boosted by the lending component due to the central bank's process of lowering interest rates. This led to a yearly high of 59 points for credit activity among SMEs. The share of loan approvals among applicants also increased from 51% to 68%.
Despite these positive signs in the lending sector, the sales component for SMEs remains in a deep decline, at its lowest level in two years. For the first time this year, the share of respondents with a pessimistic outlook on sales exceeded those with a positive outlook.
Representatives of this sector are concerned about the current economic situation and high credit rates, as Tikhonov noted. Satisfaction with the labor situation remains at historical lows (49.1 points).
Institutions like the KfW and the ifo Institute have also reflected these concerns in their analyses, discussing political risks and economic uncertainty affecting SMEs. Christiane von Berg, a representative, has been among those discussing these issues.
In conclusion, while there are signs of improvement in the lending sector, the overall business environment for SMEs remains challenging. The uncertainty is expected to continue as SME representatives cautiously assess business conditions for the near future.
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