Despite improvingBrazil's growth forecast for 2017, Fitch Ratings said it expects bank lending inthe country to remain conservative.
Banks have reducedthe granting of new loans in both 2015 and the first half of 2016 by 3.2% and 6.8%,respectively, driven by recession, slumping consumer spending, weaker confidenceand falling investment, Fitch said.
"We expectbanks to continue this cautious approach to credit demand until they see clear signsthat economic growth can be sustained," the rating agency stated.
The agency anticipatesnew credit demand from corporates with investments showing their first quarterlyincrease since the third quarter of 2013, but noted that banks will return timidlyto corporate lending given companies' weak finances and a high number of bankruptcies."Cash flow generation in the corporate sector is weak, making it difficultfor companies to support the high cost of borrowing in Brazil," Fitch added.
Fitch said itraised Brazil's growth forecast to 1.2% in 2017 and 2.2% in 2018, respectively,from 0.7% and 2%.