In our last article, we took stock of 2023. We highlighted the positive surprise in economic activity, the more restrictive environment for business credit, especially in the second half of the year, and the improvement in indicators that directly affect consumption, such as unemployment and income. Now we propose a discussion about 2024. What, after all, will remain the same and what should change over the coming months? And, within the general economic framework, what are the prospects for the credit market?

Projections point to a slowdown in economic activity in 2024. O first Focus Bulletin of the year indicates GDP growth of 1.59%, below what should be seen in 2023 (2.9%). The slowdown in the pace of growth of the Brazilian economy is associated with two vectors: the first is the fall in agricultural production, especially soybeans and corn. Agribusiness organizations even talk about crop failure due to the El Niño phenomenon, which has caused excessive rainfall in the South and severe drought in the Midwest. In this sector, the scenario for 2024 is quite different from that observed in 2023, when there was an extraordinary increase in production.

The second vector is the lagged effect of the interest rate on the sectors most sensitive to monetary policy, which should limit growth in services and industry. Looking ahead, projections for the prime rate point to a continuation of the downward cycle: according to the Focus Bulletin, the SELIC is expected to reach 9% per year in December 2024. The current level is 11.75% per year. This trajectory depends on the government's commitment to the policy of controlling spending, including compliance with fiscal targets, according to the Central Bank of Brazil has been highlighting.

On the world stage, the good news is that the cycle of interest rate hikes is coming to an end as inflation cools. This outlook is based on the most recent data on price trends, although it is still incipient. The projections for the prices of the main commodities, including oil, are stable, according to the World Bank ( The World Bank ). However, geopolitical tensions in various parts of the world, such as the Middle East, Eastern Europe and, more recently, Latin America, remain a risk factor. We also have international political turbulence in 2024 with elections in the USA, the European Parliament, Mexico and Uruguay.

In short, the general economic picture holds out the prospect of disinflation, falling interest rates and a slowdown in growth, especially for Brazil.

Given this scenario, what is the projection for credit?

For 2024, the credit bureau sector expects the balance of loans and financing to grow above inflation, including in the corporate segment, which has faced greater credit restrictions in recent months. Projections by financial institutions point to growth of around 8.5% for the credit portfolio, according to the FEBRABAN (Brazilian Federation of Banks).

The bureau sector believes that the growth of the credit is anchored in conjunctural aspects, such as the fall in unemployment, the reduction in interest rates and the recovery in average consumer income, and in structural aspects. Over the last few years, changes to the rules governing the credit market have produced advances in credit discipline, given visibility to millions of consumers and companies and promoted competition between financial institutions. The list of measures includes the recently approved Guarantees Framework, the Over-indebtedness Law and the modernization of the Positive Registry. The expectation is that the maturing of these initiatives will have the effect of expanding the supply of credit and raising the credit-to-GDP ratio to a new level.

In terms of delinquency, the most recent data from the sector shows that the number of people in debt is falling, after a period of strong growth. This trend should continue in the short term, also reflecting the fall in debt indicators.

Over the last decade, the effort to modernize the credit market has involved the entire market, including entities, the productive sector, the government and regulatory bodies. Faced with new technological possibilities and regulatory challenges, it is important that this channel of dialog is maintained in 2024, in order to make this market more efficient and accessible.