Private Sector Credit Stalls in Argentina: Signs of Recovery or More Decline?

Although economic activity is still far from showing signs of recovery, the level of credit to the private sector he could present one of the first yellow lights. In April, following the deepening of the Central Bank’s rate cut (BCRA), for the first time in more than five months successive stocks pesos loaned in banks stopped the fall.

According to data from the Central Bank, as of the last day of last month, the funding to the private sector halted its decline. In particular, it ended the fourth month of the year with a decrease of only 0.1% compared to what it had recorded in March.

“Consumer credit and business lending seem to have arrived one floor after the deep fall that they have been showing since November 2023. This is probably because the strongest shock of the fall in activity is subsiding, meaning that there will be a recovery very little demand, although still at very low levels,” warned consulting firm LCG.

Household financing showed a slight recovery above inflation expectations. Consumer loans showed a slight rebound: 0.9% per month. breaking the streak of 5 consecutive months of decline. Within this world, the evolution of personal loans stood out, which evolved 3.5% above the price increase in the economy.

“The specified increments are indicated They are well below the year’s inflation, but after several months they finally manage to clearly cross the inflation line, thus showing growth in real terms. The reduction in the interest rate led by the BCRA in the past months has led to the expansion of credit lines,” explained First Capital Markets partner, Guillermo Barbero.

“With that expectation the rate may continue to decrease In the near future, financial institutions will be more likely extension of dates of funding. These two factors together make it possible increase in capital loaned to each individual” he said.

The fall in consumption means that there is no positive evolution in the stock of credit cards in pesos, which fell 0.1% last month. However, there was an improvement in the performance of these lines, compared to what was seen in March, they could be anchored to return the official Quota Simple program already more aggressive advertising in banks.

In year-on-year termsconsumer loans sank 36.7% above inflation in the last twelve months. Loans with collateral, such as mortgages and guarantees, fell sharply in April, although a recovery is expected in the coming months, stimulated by a return in the supply of loans for housing financing.

On the business financing side, last month’s change was neutral and account advances showed the lines that grew the most, with an increase of more than 5% above inflation.

Although the market believes that the Central Bank will go even further with its policy of reducing interest rates, which could reduce the cost of credit further, they do not believe that there will be an increase the credit to the private sector in Argentina this year. anus In relative terms, the credit to GDP ratio is the lowest in the region: at 4%, only Haiti has a lower credit default.

“The decrease in activity will continue to affect the demand and supply of loans and inflation slowing down, but still high. That’s why we do not expect a large credit expansion all year round,” they said at LCG.