Venezuelan Banking Sector Growth Likely To Slow After 2021

• Government spending will fuel growth in Venezuela’s banking sector in 2021, continuing a trend that began in late 2020.  
• Asset, loan and deposit growth spiked in Venezuela in late 2020 and early 2021, fueled by public spending by the Partido Socialista Unido de Venezuela (PSUV)-led government, as part of its response to the COVID-19 pandemic and to shore up its popular support ahead of the December 2020 National Assembly election. 
• Public spending has been the primary driver of the sector’s asset growth over recent years, reflected in the dominance of the sector’s holdings of government bonds in the mix of total assets. For example, in March 2021 bonds comprised 66.0% of the total asset portfolio, compared to 4.9% for client loans. 
• Fitch Solutions forecasts that asset growth will reach 2,020.8% y-o-y at end-2021, in line with 2,139.4% at the end of 2020, though these headline figures largely reflect extremely high inflation in the country.   
• In the longer term, the agency expects that the sector will benefit from growing dollarization and a gradual economic recovery, though nominal asset and loan growth will likely slow.

(Source: Fitch Solutions)