Brazil Bank Lending Won’t Recover Before Next Year, Fitch Says

  • Banks are reluctant to lend, and borrowers are being careful
  • Lending won’t accelerate until economy improves, Fitch says

The plunge in lending by Brazilian banks won’t end before the economy begins to show signs of recovery next year, according to Fitch Ratings.

While some of the political turmoil roiling Brazil has abated after Michel Temer took over the presidency Aug. 31 following Dilma Rousseff’s impeachment, a resurgence in growth isn’t guaranteed, analysts Pedro Carvalho, Esin Celasun and Claudio Gallina wrote in a report.

The Brazilian economy is forecast to contract 3.4 percent this year after shrinking 3.8 percent in 2015, then expand 1 percent in 2017. In the first half of 2016, new lending fell by 8.5 percent from a year earlier, according to Fitch.

"It’s not only that banks are reluctant to lend," Gallina said. "People and companies don’t feel safe to take on loans in this challenging and low confidence environment."

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