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Total credit granted to the non-financial private sector remains weak. It dropped again in January and was widespread across the country according to regional data as of 4Q20. Total deposits remained strong in annual terms in spite of a seasonal drop at the beginning of the year.
The allocation of resources to productive sectors is a factor that supports sustainable growth. Therefore, it is important to understand how the credit boost in recent years has been distributed among the sectors and whether those sectors also perform well in terms of productivity.
March 18, 2021
Mexico | Credit to the non-financial private sector with second decline in nominal terms
In January 2021, the balance of current credit granted by commercial banks to the non-financial private sector once again registered an annual fall in nominal terms, which was -1.3% (-4.6% in real terms), practically the same as that observed in December (-1.2%).
Six months after the return to the use of the interest rate as a monetary policy instrument of the Central Bank, we report first results.
The increase in long-term interest rates has generated some anxiety in the markets, but this should not pose a threat to global growth.
During 2020 banking intermediation showed resiliency but was not unscathed. Bank deposits grew at double digits, however, credit to the private sector dropped for the first time in the last ten years. In 2021, investment and employment growth will be key for the strength of the sector.
The economic recession and the restrictions associated to the pandemic have brought unusual circumstances for the banking system. On the one hand, credit growth to the private sector dropped for the first time since 2010. On the other hand, deposits growth remains strong.
This report is trying to answer the three questions: What is the underlying logic of the ongoing RMB appreciation trend? Is the trend sustainable as the global economy normalizes? And where will the RMB exchange rate go at end-2021?