Growth To Support Banking Sector In 2013
BMI View: We expect continued private sector loan and deposit growth in Paraguay's banking sector in 2013 , as a rebounding economy increases the willingness of banks to extend credit and strong performance in the agricultural sector swells private sector deposits. While still heavily reliant on foreign currency-denominated lending and deposits, we note that the trend is toward greater use of domestic currency. Additionally, the banking system benefits from very low delinquency rates.
We expect to see steady growth in Paraguay's banking sector in 2013 , as a surging economy supports private sector lending and grows deposits. While small in nominal terms, Paraguay's banking sector is fairly well-developed by regional standards. Indeed, with loans and deposits at 32.3% and 34.0% of GDP, respectively, banking sector activity in Paraguay is greater compared to the size of the economy than in Peru, Venezuela, Mexico, and Argentina.
Additionally, the banking sector has been increasingly maximizing its use of deposits for lending purposes. Over the past several years, private sector loan growth has consistently outpaced deposit growth, sending the loan-to-deposit ratio higher ( see chart, below). While loan growth slowed abruptly in H212, as the Paraguayan economy contracted, we expect a rebound in 2013 on the back of surging economic growth, part of our forecast for real GDP growth to hit 7.0% in 2013 ( see our online service, March 14, 'Big Bounce For Economy In 2013'.) In particular, we see continued private sector loan growth supporting a recovery in real private consumption this year. After growing by just 1.0% in 2012, we forecast real private consumption growth of 4.5% in 2013.
|Relatively Large, Relative To GDP|
|Latin America - Private Sector Loans & Deposits To GDP, %|