Brazil’s credit growth likely to have contracted further year-on-year in December

Brazil’s credit growth on a year-on-year basis is declining on low business activity. In November, credit growth contracted to 2.3 percent, with business credit falling 7.2 percent year-on-year and individual credit growth decelerating to 3.2 percent. 

There is slight indication that the rate of credit growth slowdown has begun subsiding in the past couple of months, in line with the economy getting closer to bottoming out. Credit was up 0.3 percent sequentially in November and is expected to have further risen by 1.1 percent to BRL 3.139 billion in December, according to a Societe Generale research report.

“This still implies that credit growth in yoy terms will fall further to -2.5 percent and that the credit/GDP ratio will slip further towards 49 percent of GDP from the peak of 53.6 percent in 2015”, added Societe Generale.

On an average, the deceleration in business credit growth quickened in 2016 barring fourth quarter, underscoring weak investment demand in general. Credit growth is likely to stabilise a few quarters after the economy begins expanding again.