Brazil’s credit growth likely to have slowed again in June

Credit growth in Brazil is likely to have declined again in June. The country’s outstanding credit has fallen every month in 2016 before rising marginally in May. However, the trends in consumer and business credit growth continue to show the challenging demand growth in Brazil that indicates that a reversal is not expected to take place in credit growth in the next few months.

In May, credit growth pace decelerated to 2 percent on year-on-year basis, whereas business credit growth slowed to -0.5 percent year-on-year. The overall credit is likely to have declined to 0.1 percent month-on-month to BRL 3142 billion in June, said Societe Generale in a research report.

In the past few months, the slowdown in credit growth has quickened, especially in the business segment, highlighting the continued deterioration of investment demand. This trend is not expected to rebound in the near term, in spite of expectations of policy support after political changes and inflation moderation and some rebound in investment sentiment, according to Societe Generale.

Consumer credit growth is expected to continue to decelerate as the labor market is worsening and the government’s aid for credit programs should reduce after the focus on fiscal consolidation.

“In the medium term, credit demand growth will remain weak even if the economy reverts to growth (in our baseline scenario we do not expect the economy to grow before 2H2017)”, added Societe Generale.