Fitch Ratings predicts that refinancing risks for German SMEs will increase in 2024 due to the steady tightening of credit conditions over the last two years. The deteriorating asset performance outlook for 2024 is reflected in the combination of credit tightening and a weaker macroeconomic backdrop. German development bank KfW reported that 31.7% of SME borrowers described banks' stances in loan negotiations as 'restrictive' in 3Q23, the highest level in nearly six years. This increase in credit constraints is driven by ECB policy rate increases and greater risk aversion among banks across all sectors, with the largest increases in services and manufacturing. Germany's macro-economic expectations predict a weak real GDP growth of 0.4% in 2024, following a small contraction in 2023 due to deteriorating asset performance. German SMEs rely heavily on bank credit for funding, accounting for 30% of their funding needs in 2022, and tighter credit conditions may impact performance in 2024.