Brazil’s Credit Market Challenges in 2023
In 2023, Brazil experienced a substantial decline in the growth rate of outstanding loans, dropping from 14.5% to 7.9%, according to data released by the central bank. Despite a 1% increase in credit stock in December, reaching 5.8 trillion reais ($1.16 trillion), the credit market faced challenges due to elevated borrowing costs throughout the year.
To combat inflation, policymakers initiated an easing cycle in August, reducing the benchmark interest rate from its six-year high of 13.75% to the current rate of 11.25%, which closed at 11.75% in 2023. Policymakers noted that the credit market was already reflecting the effects of monetary easing, with increased credit granting and reduced interest rates on new operations.
Despite these efforts, the household credit growth in 2023 slowed to 10.1% compared to 17.7% in the previous year, while corporate credit increased by 4.5%. The non-earmarked credit default rate, covering both businesses and individual borrowers, rose by 0.5 percentage points year-over-year to 4.7% in December. Lending spreads increased by 1.4 percentage points to 30.2 percentage points in 2023.
Moreover, amidst European Union sanctions prohibiting the import of Russian refined products, Brazil emerged as the primary importer of Russian seaborne diesel and gasoil, as reported by market sources and LSEG. Despite government initiatives, including the consumer debt renegotiation program Desenrola, credit costs increased during the year.