Strong Contraction of Credit

BRAZIL ECONOMICS - Report 26 Jun 2015 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

Executive Summary

Since the level of nonperforming loans started to creep upward in late 2011-early 2012, private banks have been extremely cautious in extending new credit, both to consumers and companies. The most recent data indicate sharper contraction of non-earmarked credit and less impetus from earmarked credit, in particular from the BNDES and to housing financing. This evidence strengthens the expectation of a larger dip in GDP in the next quarters and casts doubt on the speed of the recovery, since neither household consumption nor investments will count on credit as a driver.

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