The successive rate reductions defined by the Central Bank caused a significant impact on the evolution of credit granted by financial entities. In the last 30 days The stock of loans to the private sector showed an increase of almost 14%greatly exceeding last month’s inflation, which would be below 5%.
The granting of credit had been in free fall in the last year, due to a mix of different factors but above all the rates that had gone through the roof and the fall in economic activity. The drop in inflation from the peak of 25.5% in December triggered successive reductions in monetary policy rates.
At the same time, the Treasury’s fiscal surplus generated lower demand for financing and banks now have more liquidity available. Therefore, they were forced to go out and lend to maintain good levels of profitability.
The reappearance of credit was reflected in all segments. For example, current account advances and document discounts grew almost 15% in one month. The interesting thing about these working capital lines for companies is that the reduction in rates was impressive and many companies already achieve lines at 20% or 25% per year in pesos.
On the other hand, it also had a strong jump in personal loans, which grew no less than 20%. The reduction in rates also encouraged more people to choose to take these types of lines. The drop in salaries also plays a role, leading to more people needing financing to make ends meet.
The reappearance of fees for card purchases was one of the most significant data last month, especially after the Hot Sale. In many cases, the appliance and white goods chains decided to absorb the financial cost and returned the 12 interest-free installments, which in some specific cases reached 24.
This recovery does not include mortgage loans for now announced by most banks. For now, most are in the process of analyzing the requests that come from customers. Only between June and July will there be a better idea of the magnitude that the reappearance of these new lines, which require long-term funding, could mean.
The main impact of the return of credit for the economy is the reactivation of installment purchases. This is especially important for products that are almost unaffordable for most families if they had to purchase them in cash, such as refrigerators, screens or computers.
In fact, the almost total slowdown in sales in the first quarter of the year, at least in these areas, was related to the almost total absence of financing. Now, with softer financial conditions, buyers are slowly re-emerging.
Something similar happened with car sales. Offers with financing options reappeared in several dealerships and allowed a rebound in patenting in both April and May, after a very marked collapse in the first part of the year.
Credit to the private sector, however, represents less than 10% of GDP, the lowest in the entire region (except Venezuela) and one of the lowest in the world. Therefore, even significant rebounds like the one in the last month have a very limited impact on moving the level of activity. However, in some specific sectors it can make significant differences, such as the sale of white goods and the related value chain.
Now All eyes are on how the level of inflation continues to consolidate the lowering of rates and to sustain the reappearance of credit to the public and companies. It will not be easy in the short term to maintain the decline below 5%, but at the same time the challenge is to avoid a rebound in the coming months so as not to affect expectations.
