Latin America Private Sector Debt: Central Banks' Hawkish Shift To Rein In Credit Growth

• Private sector credit growth in Latin America is expected to slow in the quarters ahead according to  the Fitch Rating Agency as central banks across the region tighten monetary policy to clamp down on rising inflation.
• Moreover, financing needs will subside relative to 2020, when pandemic-induced losses boosted credit demand among households and businesses. Data through Q420 show strong private sector credit growth throughout 2020. In particular, H120 saw a surge in credit growth as households and businesses, supported by government stimulus measures, sought to cover losses amid the onset of the pandemic.
• Most Latin American central banks cut their policy rates to all-time lows and launched extraordinary monetary stimulus measures to support credit flows to households and businesses and prevent financial instability amid the crisis.
• That being said, recovering economic activity will likely place a floor underneath the slowdown in credit growth as businesses borrow to expand production amid rebounding demand and falling unemployment boosts household incomes.

(Source: Fitch Solutions)