Stepping on the lending gas: BNDES expects faster 2024 loan growth

Brazilian development bank BNDES is projecting faster-than-expected loan growth for this year due to strong first half figures.

"We increased loan approvals by 79%, which is a spectacular evolution considering that interest rates in Brazil remain very high. We had 21% higher disbursements, which was also very strong in terms of disbursements," BNDES president Aloizio Mercadante said in a statement.

Mercadante now believes that the faster loan growth at the country’s largest development bank could have a positive impact on the economy.

"The data is very strong, which makes me think that the finance ministry will have to review the economic growth projection for this year. Through BNDES, we will have greater growth than what is projected so far," said Mercadante.

The ministry increased its 2024 growth projection in May to 2.5%, from 2.2% in March.

Some local analysts do not agree with the bullish outlook.

"In my view, the finance ministry's estimate of 2.5% growth is already at an optimistic level since I expect an expansion of 2.1%, but it’s within the margin of error," Mário Sérgio Lima, an analyst at Medley Global Advisors, told BNamericas.

If the finance ministry makes upward forecast revisions in an exaggerated way, it creates problems as these forecasts are used for budget projections that affect market expectations for the government’s tax collection and overall fiscal performance, he said.

Lima also warned of risks associated with the accelerated pace of lending at BNDES. 

"So far, BNDES’ loans are growing without extra funding from the government, without subsidized interest rates. But this is an issue that needs to be monitored closely so that we don’t see a repetition of past mistakes."

During past administrations of the ruling Workers' Party, BNDES as well as other state banks were used to stimulate the economy through aggressive lending, which generated distortions such as fiscal problems and inflationary pressures, in turn putting upward pressure on interest rates.