Widespread revision reflects worsening economic outlook with potentially higher inflation and interest rates slowing down borrowing in 2025 and 2026
02/18/2025
Brazilian banks have revised lending growth forecasts for this year to 9% from 8.5%, according to the Banking Economy and Expectations Survey by business federation Febraban. Among the major lenders that have already released their balance sheets, growth projections for their portfolios are even lower, around 6.5%.
According to Febraban’s survey, the portfolio of loans from non-directed funding is expected to expand by 8.1% this year (down from 8.3% in the previous survey), and the directed portfolio by 9% (down from 9.7%). When broken down by borrower type, business lending is expected to grow 7.1% (down from 7.8%), while consumer credit is expected to rise by 8.6% (down from 9.1%).
The downward revision of industry expectations was widespread, reflecting a consolidation of economic expectations for the year. “This revision was already anticipated and has been shaping up since the last quarter of 2024. The result reflects a worsening economic scenario, with expectations of higher inflation and, consequently, higher interest rates throughout the year,” stated Rubens Sardenberg, director of economics, prudential regulation, and risk at Febraban, in a press release.
The survey also collected the first projections for credit growth in 2026. The average forecast indicates a continuing slowdown in lending growth, with an anticipated expansion of 7.7% next year.
Meanwhile, there was a slight improvement in the projection for the default rate of the non-directed portfolio this year, which dropped from 4.7% to 4.6%, although it remains above the level observed at the end of 2024 (4.1%). This result can be attributed to increased caution in credit provision, which may reduce the expansion of defaults over the year.
The survey shows that a significant majority of respondents (76.2%) expect the Selic rate to rise beyond 14.25% per year in 2025, and that the cycle of cuts will not begin this year. For comparison, in last December’s survey, only 47.4% selected this option, showcasing a less optimistic view of the scenario since then.
In this context, expectations for interest rates have risen compared to the previous survey. Now, the median projection for the Selic rate is 15.25% per year by June 2025, remaining at this level at least until September.
Conversely, the projection for the exchange rate at the end of the year has improved, dropping to R$5.95 from R$6.00 previously. Regarding inflation, just under half (47.6%) of lenders believe it will be close to 5.5% (the current market consensus). However, one-third of analysts surveyed now expect inflation to be close to (or above) 6% this year.
Regarding economic activity, a little over half (52.4%) of the participants continue to project GDP growth of around 2.0% in 2025, similar to the previous survey (50% of respondents).
*By Álvaro Campos, Valor — São Paulo
Source: Valor International