Brazil’s Credit to GDP Ratio Reaches 14-Year High: US$ 600 Billion

Brazilian camelô (street vendor) accepts credit card In Brazil, credit operations on the financial market reached 1.11 trillion reais (US$ 598 billion) in August, a value that represents 38% of the Brazilian Gross Domestic Product (GDP). This is the largest share in recorded history, since 1994.

The information was disclosed in a report by the Central Bank of Brazil (BC). In the previous month, the share was 37.2% of GDP.

According to the BC, "In August, credit operations in the financial system maintained a the trajectory of growth that had been identified in previous periods, showing, however, a cooling of operations turned to natural people." According to the bank, the reduction of personal credit and financing for vehicle purchase was identified, but purchases through leasing are still on the rise.

With regard to companies, the BC has informed that the demand for bank loans based on domestic resources is still growing. The greatest demand is for working capital.

Despite expansion of credit, consumers are still paying more for funds. The rate of personal credit, which includes operations with discounts on the paycheck, rose 0.9 percentage points in August and totaled 54.5% a year. Interest rates on overdraft facilities are still high and reached 166.4% a year, 3.7 percentage points more per month and 28.3 percentage points higher per year.

The average interest rate for companies and natural people was 40.1% a year, 0.7 percentage points higher than in July and 6.3 percentage points up in the year. For companies, the rate has grown from 27.5% a year to 28.3% a year.

For natural people the rate grew from 51.4% to 52.1%, the greatest since January 2007 (52.3% a year). The total rate of default remained stable, at 4.2%, as did that for companies, at 1.7%, but for families it rose from 7.3% to 7.5%.

The average span for financing for companies was reduced by three days and reached 296 days running. For families the average span rose from 470 to 473 days running. The average span was 373 days running, one day less.

Growth Projection

The Brazilian Central Bank is expecting greater economic growth this year. According to the Quarterly Inflation Report, disclosed by the organization, the projection of increase for the Gross Domestic Product (GDP), which is the sum of all goods and services produced in the country, has risen to 5%. The rate is 0.2% higher than estimated in June.

The projection is made based on a reference scenario assuming that the basic interest rate (Selic) is going to remain at 13.75% throughout the year and that the exchange rate for the dollar will remain at 1.80 reais (US$ 0.97).

"The upward revision of the estimate reflects an overall improvement of projections for both production and demand," the document states. According to the report, GDP growth should continue, even in the face of reduction in the level of economic activity worldwide.

ABr

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