The household credit demand will pick up in Brazil over 2019, supported by a stronger labour market, low interest rates and broadly positive sentiment, Fitch says.
In a report released last April 8th, the rating agency maintains its view that credit growth in the Brazilian system will pick up over the coming quarters, in line with stronger economic activity. «Our core view remains that economic activity growth will rise modestly, driven by a cyclical rebound in consumption», says Fitch.
Latest figures show that Brazil’s total credit was up 5.5% y-o-y in February, led by a 9.0% rise in lending to individuals, well outpacing growth in the corporate sector.After a period of deleveraging, the household debt servicing ratio is at multi-year lows, at 19.8% overall in January and 17.4% when mortgages are excluded. While unemployment has risen in the first two months of 2019, the labour market is improving, adding a net 489,520 formal jobs in the year through February, of which 207,452 were added in January and February. Consumer sentiment is improving, in part reflecting optimism over the Bolsonaro administration’s ability to improve the economy, suggesting a stronger willingness to take on debt.
Regarding asset quality, «non-performing loans (NPL) in Brazil are likely to remain moderate over the coming quarters, benefiting from low interest rates and rebounding economic activity», Fitch forecasts. Until 2015, NPLs had steadily declined since 2012, when an economic slowdown – following a significant run-up in household debt levels – saw NPLs hit 4.0% of the total portfolio. This was largely due to an increase in non-performing credit from households. NPLs are beginning to fall, supported by improving economic growth and low interest rates. According to the rating agency, total NPLs came in at 2.9% in February.
Fitch forecasts real GDP growth will rise to 2.0% y-o-y in 2019, from 1.1% in 2018.
Original Story:Fitch Solutions | Fitch Solutions Press Release
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Edition:Prime Yield