Economy

Brazil: savings see their biggest outflow in 5 years amid hiking inflation

Brazilians boosted their bank savings by a net BRL 7.7 billion in December, the lowest figure for the month in six years

Financial life: most Brazilians live on the edge, according to a survey by Febraban
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Brazilian savings accounts suffered their biggest outflow in five years in 2021, official figures showed on Thursday, as financial conditions deteriorated for families and companies amid double-digit inflation and aggressive interest rate hikes.

Brazilians boosted their bank savings by a net BRL 7.7 billion in December, the lowest figure for the month in six years.

That took the annual total to a BRL 35.5 billion ($6.23 billion) outflow, the first negative number since 2016. The balance of savings accounts in Latin America‘s largest economy ended the year at BRL 1.03 trillion.

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In contrast, savings accounts grew by a record BRL 166.3 billion in 2020 as the government spent heavily to combat the effects of the COVID-19 pandemic, including via cash transfers to the poorest, a program that was substantially reduced in 2021.

Also, from March, an increase in the Selic benchmark interest rate amid rising inflation made savings rates less competitive compared to other fixed-income investments.

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The central bank more than quadrupled its benchmark rate last year to 9.25% from 2% and has already signaled another 150 basis point hike in February.

The annual rate of inflation in mid-December stood at 10.42%, far above the central bank’s year-end target for consumer price inflation of 3.75%. The central bank acknowledged inflation has proven to be more persistent than anticipated, stirred by surging fuel and energy prices.

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