Credit: No Reasons for Optimism

BRAZIL ECONOMICS - Report 03 Jun 2013 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

In assessing the reasons for the weak GDP performance in the first quarter, two points stand out. The first is the fall in the contribution of household consumption, which grew only 0.1%, and the second is the slower growth of GDP in the service sector, largely determined by the stagnation of financial intermediation. The common ground underpinning these two factors is the declining expansion of bank credit, which at the same time discourages growth of consumption and contributes to the poor performance of financial intermediation. Therefore, it is important to analyze what is happening in the credit market, in particular to detect whether the most recent figures indicate any change in this behavior.

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