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In the last article, I presented a retrospective of 2022 for the credit market. In cyclical terms, the credit balance continued to grow, especially in the individual segment. In structural terms, the year showed that changes in the way financial services are consumed have survived the end of the long period of social isolation and are here to stay. Looking ahead, what can we expect in 2023?

Let's start with the economic situation. Faced with inflation and rising interest rates, the world is heading for a slowdown in economic activity. In Brazil, growth projections for 2023 are still quite modest, at around 0.75%, according to the Central Bank's Focus Bulletin. We must bear in mind that it is still very early days and that the direction of economic policy will become clearer.

In the credit market, even with the low growth projected for GDP, there is an expectation that the balance of loans and financing operations will continue to advance at high rates. According to Banking Economics and Expectations Survey, According to FEBRABAN, the balance of the credit portfolio of the national financial system is expected to grow by 8.4% in 2023, maintaining a more intense advance in credit to individuals (10.4% in the free credit portfolio for individuals, compared to 9.3% in the free credit portfolio for individuals).

The organization's survey also shows that 88.9% of institutions believe that defaults will continue to rise next year and only 11.1% are betting that arrears will remain at the current level. We anticipated in this space the risk of defaults rising throughout 2022. Next year will be the time to address this issue. The figures from the bureaus point to record numbers of people in debt in the country, exceeding 68 million Brazilians.

Faced with the default, a renegotiation is one of the ways to do this within the rules of the market. The bureaus have been promoting the Clean Name Fairs, with the aim of bringing creditors and consumers closer together. In addition, they provide platforms throughout the year to facilitate negotiations, allowing consumers to regain financial control and overcome credit restrictions.

Judging by the latest projections, the cost of credit will remain high next year: the Focus Bulletin predicts that the basic interest rate in the economy will remain in the double digits, ending 2023 at 11.75% per year. This rate is lower than the current one, but still quite significant, requiring caution on the part of consumers when taking out financing and loans. When renegotiating, in addition to demonstrating an interest in getting rid of debts, it is necessary to know how to evaluate the conditions of the agreement, including the costs of the operation and the ability to absorb the renegotiated installments in the budget.

The cyclical conditions of credit are important, but the sector has been undergoing structural changes that should have an impact on its performance. The basic interest rate was set at a high level to combat inflation, but some recent instruments could reduce interest rates at the top, especially for consumers with a good credit history. A study by the Central Bank showed that there is already a difference in the interest rates charged to consumers with information from the Positive Registry available for consultation and consumers who do not have this information available. The trend is for this effect to deepen.

Finally, it's worth saying that the changes in the credit market continue. On the agenda for the coming months is the collateral framework, which is currently before the Senate. The aim is to make the credit recovery process less time-consuming by creating institutions in charge of evaluating assets given as collateral and allowing the same asset to be used to guarantee more than one operation.

In 2023, credit bureaus will continue to look inwards, seeking to improve their models and increase the relevance of credit assessment. And, as has been the case in recent years, they will also be looking outwards, actively participating in the debate on modernizing the credit market and financial inclusion in the country.

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