Interest Rates and Credit

Brazilian Economy Outlook



Credit expansion in line with the country´s degree of development


The analysis of credit evolution in Brazil in the first two months of 2012 shows a slight reduction in the pace of expansion of contracted volume. Credit as a share of GDP reached 48.8% in February 2012, against 49.1% recorded in December 2011. Part of the slowdown can be explained by the increase in consumer credit delinquency, which contributed to the decrease of credit offered by banks, despite the signaling by the Central Bank that interest rates will keep falling. The decline also reflects monetary policy actions and macro-prudential measures introduced throughout 2011.

However, in comparison with February 2011, credit as a percentage of GDP increased 3.7 pp Companies and individuals’ outstanding loans increased by 14.6% and 20.4%, respectively, when compared to February 2011, which is consistent with the moderate expansion of economic activity. The continued decline of interest rates coupled with the positive evolution in formal job creation should boost growth in credit operations during 2012, particularly in the second half of the year.






________________


Brazilian Economy Outlook