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With the data released so far, it is already possible to take stock of the main credit indicators in 2023, which also requires a contextualization of the more general economic indicators. We will take as our starting point the outlook outlined at the beginning of the year, comparing the forecast with the actual result.

After the growth seen in 2021 and 2022, years still marked by the spectre of the pandemic, expectations pointed to a moderation in the pace of growth, with projected progress below 1%. Over the course of the year, however, growth projections were revised upwards. According to the latest data from the IBGE (Brazilian Institute of Geography and Statistics), Brazil's GDP accumulated an increase of 3.2% in the first three quarters of the year and should end 2023 with an increase of 3%, according to the Focus Bulletin. The performance of the agricultural sector was decisive for this result.

Local inflation continued its downward trend and accumulated an increase of 4.7% in the 12 months ending November 2023. The fall in inflation, as predicted at the start of the year, opened up space for a reduction in the SELIC rate. At the beginning of 2023, the SELIC rate was expected to end the year at 12.25% per year. At the last COPOM meeting, the SELIC rate was set at 11.75%. The Committee also signaled that, if the expected scenario is confirmed, it should maintain a cut of 0.5 percentage points in future meetings.

For consumers, the continued fall in unemployment and the rise in real income have brought economic relief. Consumer confidence data indicates that this improvement has been felt. The commitment of household income to loans and financing has slowly receded, after peaking at the beginning of 2022. Data from the credit bureau sector shows, however, that the level of default is still high. Estimates point to around 70 million consumers in arrears in the country, which represents 40% of the adult population.

Against this backdrop, how did the credit market perform? Data from the Central Bank of Brazil shows that the balance of free credit to individuals grew by 8% in the comparison between October 2023 and the same month of the previous year, close to what was predicted at the start of the year. On the other hand, free credit to legal entities increased by 1.1% on the same basis of comparison. This result, if deflated, represents a decline in credit to companies in real terms, i.e. discounting inflation.

The slowdown in the personal loans segment follows a period of strong growth in loans to companies, driven by the programs created during the pandemic. And it was aggravated in the following months, with a significant retraction in credit to companies, reflecting uncertainties about the financial health of retail organizations.

Another important surprise came from abroad. Throughout the year, the monetary authorities of the major economies communicated their concerns about persistent inflation and signaled that interest rates would remain high for longer. In its most recent statement, the Federal Reserve softened its tone, signaling the end of the monetary tightening cycle.

In short, the economic situation showed resilience in economic activity in 2023, imposing an additional challenge for central banks, especially in the major economies. In Brazil, as expected, the prime rate was lowered after a debate about the best time to start the downward cycle. Even during the period of higher interest rates, credit to families continued to rise, while credit to companies slowed down.

In addition to the economic data, it is worth highlighting the evolution of the agenda for modernizing the Brazilian credit market. At the beginning of the year, we highlighted the expectations surrounding the progress of the Guarantees Framework. In October, this framework was finally approved. Also noteworthy was the entry into force of Joint Resolution No. 6 by the Central Bank of Brazil and the CMN (National Monetary Council). In this space, we also discuss the importance of this instrument for curbing financial fraud, as well as the contribution of bureaux to complying with this regulatory requirement.

Throughout the year, the bureau sector continued its efforts to expand the information bases of the Positive Registry, aware of the importance of this instrument for financial inclusion. At the same time, the sector monitored consumers' financial habits and knowledge of risk assessment tools. This awareness is fundamental for consumers to realize that their credit behavior is decisive in obtaining fairer conditions when contracting.

There are a few more important steps to be taken towards modernizing the credit market and making people more aware of the use of credit. But that's a topic for the next article, in which we'll look at the outlook for 2024. Happy holidays and see you soon!

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By: Elias Sfeir President of ANBC & Member of the Climate Council of the City of São Paulo & Certified Advisor