Dwindling economic activity, lower income cause credit slowdown
Brazil's dwindling economic activity, along with income eroded by inflation and lower investment from companies have slowed down the pace of credit operations in the country. 
Brazil's dwindling economic activity, along with income eroded by inflation and lower investment from companies have slowed down the pace of credit operations in the country. According to data from the Central Bank, the balance of credit operations in Brazil totaled $921 billion in June, up 0.6% in the month, and 9.8% in the 12-month period. As for the first semester this year, the increase stands at 2.8%—against a growth of 4.2% in the same period in 2014.
The Central Bank also announced that indebtedness among families in May accounted for 46.3% of the income generated over the last 12 months. The outcome is virtually steady if compared to April, with a slip of 0.1 percentage point. In 12 months, a 0.7 percentage-point rise was reported. If mortgage indebtedness is not considered, the figure also dropped by 0.1 from April to May, reaching 27.5%.
The financial institution's forecasts for the year is a 9% surge in credit. Last year, the expansion totaled 11.2%. According to the Central Bank, the slowdown comes hand in hand with the interest rates, driven up by the cyclical hikes in the country's benchmark Selic and the reduced demand for consumption and investment.
Apart from those two factors, Central Bank head of the Economic Department Tulio Maciel further mentions that moderation in credit is “a natural trend”, as operations have expanded considerably after around 2002, when the balance of loans was low. “We've left a low base. Naturally, as the base expands, growth rates slide year after year. This particular year has seen determining factors which form the very dynamics of the economy and the interest rates,” he noted.
Maciel also pointed out that credit expansion tends to be lower in the first half of the year. “It's a matter of economic dynamics,” he added.
Despite the costlier credit, coupled with the economy, employment, and income on the wane, insolvency shows stability. In June, insolvency among families, taking into account payments overdue by at least 90 days only, was at a steady 5.4% from May to June. Its counterpart among companies was also stable, at 3.9%.
Translated by Fabrício Ferreira
Fonte: Dwindling economic activity, lower income cause credit slowdown
