Brazilians’ savings showed a negative balance in 2021 for the first time in five years

RIO DE JANEIRO, BRAZIL – Brazilians’ savings, after reaching a record high in 2020 due to the uncertainties generated by the pandemic, registered its first negative balance in the last five years in 2021, apparently due to the need to compensate for the loss of income, the Central Bank reported Thursday.

The value withdrawn by Brazilians from their savings accounts last year exceeded R$35.5 billion (US$6.4 billion) that were deposited in the same accounts, according to data released by the issuing agency.

This is the first negative annual result since 2016 when withdrawals exceeded deposits in savings accounts by R$40.7 billion(US$7,3 billion).

According to the Central Bank, the liquid value withdrawn in 2021 from Brazil’s most popular and safest financial application (despite being the least profitable) is the third highest in a year since the indicator began to be measured in 1995.

The negative liquid balance of 2021 is only surpassed by 2015 and 2016, years in which the country suffered the most significant economic retraction in its history. Brazilians had to spend their savings due to the lack of income.

In total, Brazilians deposited R$3.410 trillion (US$609 billion) in their savings accounts last year, from which they withdrew R$3.445 trillion (US$615 billion).

Last year’s negative result came after Brazilians injected a record R$166.3 billion (US$29,6 billion) into their savings accounts in 2020.

This growth was because the population managed to save part of the subsidies distributed by the Government in 2020 to alleviate the crisis generated by the covid-19, which also reduced consumption given the social distancing measures due to the uncertainty of what would happen in the future.

The uptake of savings reached two consecutive records in April, and May 2020, when the Government was already distributing its subsidies and the population was confined to their homes, and most businesses were closed.

But in 2021, the Government reduced the value of the subsidies to almost a third, and savings only managed to register positive balances in five months, between April and July (plus December), so that withdrawals ended up significantly exceeding deposits.

Between January and March 2021, Brazilians withdrew R$27.542 billion (US$4,9 billion) from their savings accounts to pay for typical seasonal expenses, such as school fees and supplies, property tax, and vehicle taxes, in a quarter in which the Government suspended the distribution of subsidies.

The increase in savings account withdrawals in 2021 also coincided with the resumption of the Brazilian economy, which again encouraged consumption, and with inflation rising to one of its highest levels in several years.