Debts? Five perspectives to keep an eye on in 2023

Brazil ends the year 2022 with some records accumulated in terms of indebtedness and defaults – and by all indications, the situation may persist in 2023.

According to the Peic (Consumer Indebtedness and Default Survey), carried out by the CNC (National Confederation of Commerce in Goods, Services and Tourism), the share of families with debts, in arrears or not, stood at 78.9% in November of this year. The rate is lower than the 79.2% in October, but higher than the 75.6% in November 2021.

The survey also pointed out that defaulting families, that is, with overdue debts, totaled 30.3% in November this year. The level is the same as the previous month, which was already the highest in the series started in 2010.

Among defaulters, those who reported not being able to settle their debts jumped from 10.6% to 10.9%.

There are also among those indebted those families that requested the payroll loan destined to beneficiaries of the Auxílio Brasil, income transfer program granted by the federal government.

According to the Ministry of Citizenship, one in every six beneficiary families requested the loan by November 1 – there were more than 3.4 million concessions in total. The information was obtained by the G1 via the Access to Information Act.

In the payroll loan, the installments are deducted directly from the payroll.

But according to the economist at Serasa Experian, Luiz Rabi, the moment is not propitious to contract debt. “Interest rates are high and rising right now, meaning the timing is not ideal,” he says.

In addition to high interest rates, high inflation and the exchange rate also make the moment more difficult, explains the expert.

“I see little room for reducing defaults, at least until the end of the first half of 2023”, predicts Rabi.

“The interest rate and inflation may improve in the second half, but until then, expectations are not good.”

For those who are in debt or with overdue loan installments, BBC News Brasil gathered some of the main indicators that are worth observing and forecasts for the year ahead.

Inflation

According to Luiz Rabi, the default scenario in Brazil can be explained mainly by the increase in inflation – an indicator that tends to improve by the end of 2023, but which may remain high in the first months of the year.

In March 2022, the country registered an inflation of 1.62%, the highest for this month since the launch of the Real Plan, in 1994.

The market expects the IPCA to close the year at 5.79%, according to the Focus Bulletin released on December 12.

As for 2023, the economists consulted by the Central Bank in the report estimated that the inflation index will end the year at 5.08%.

And the rise in prices directly affects purchasing power, leading many Brazilian families to accumulate debts or leave bills in arrears.

According to a survey carried out by the CNDL (National Confederation of Store Managers) and by the SPC Brasil (Credit Protection Service) and released at the end of November, the creditor sector that concentrates most of the debts in the country is that of banks, with 61, 34% of the total. Next come commerce (12.67%), the communication sector (12.67%) and water and electricity, with 10.89% of total debts.

Selic rate

With inflation rising, the Central Bank also had to raise interest rates to combat rising prices. “This is the second variable that impacts default”, says the economist at Serasa Experian.

The process of increasing the Selic – which represents the basic interest rate of the Brazilian economy – began in March 2021. Since then, the rate has gone from 2% per year to 13.75%.

And in a scenario of high global inflation and political uncertainties such as the current one, the prospect is that interest rates will not fall anytime soon. “If inflation stabilizes until the second semester, it may be that the interest rate will also be adjusted”, says Rabi.

According to the most recent Focus Bulletin, the forecast for the Selic rate at the end of 2023 is 11.75%.

revolving credit card

Rates for those who purchase purchases on credit also show no signs of slowing down.

The interest rate on the revolving credit card varied from 390.7% a year in September to 399.5% in October, according to data from the Monetary and Credit Statistics Bulletin, released by the Central Bank.

This is the highest value since August 2017, when it stood at 428%.

The revolving credit line is the pre-approved credit line on the card and also includes withdrawals made using the credit function of the means of payment.

Without the prospect of a significant decrease in the Selic rate in 2023, economists also do not see much chance of a drop in this rate.

And according to Serasa Experian, the credit card remains the main driver of debts among defaulters.

“In line with the previous year, credit card debts impact 53% of indebted Brazilians”, highlighted a survey by the institution released in October this year.

Exchange rate

According to Luiz Rabi, the dollar exchange rate also indirectly impacts debt and default rates.

“The exchange rate influences inflation, which affects the population’s consumption power and the interest rate”, he says.

The market forecast is that the dollar will close 2022 at R$ 5.25, an expectation that also remains for the end of 2023.

Job

When it comes to employment in Brazil, forecasts are for stabilization at the positive rates of recent months.

Unemployment in the third quarter of this year recorded the lowest rate since 2014. According to data from the Pnad (National Household Sample Survey) Continuous, from IBGE (Brazilian Institute of Geography and Statistics), unemployment in the country was 8, 3% in the quarter ended last month.

This rate represents a decrease of 0.8 percentage points in relation to the previous quarter (May to July). Compared to the same quarter of 2021, the drop was 3.8 percentage points.

The unemployed population was 9 million people, which represents a decrease of 8.7% compared to the quarter ended in July. It is the lowest level since July 2015.

Among the discouraged, who are people who would like to work but do not look for a job because they think they would not find one, the number reaches 4.2 million people.

The performance reflects the heating up of the economy in the first half of 2022, in the post-pandemic period, but according to experts it should lose pace between the end of this year and the beginning of 2023.

This text was originally published here.