Despite more cautious initial expectations, associated with financial risks of the sharp rise in interest rates in the context of elevated global indebtedness, 2023 was marked by a notable economic performance: inflation fell, even though activity remained resilient in the main emerging-market and developed economies. Restrictive monetary policies and more moderate fiscal impulses contributed to this result, which was also bolstered by supply chain regularization and a huge shock to prices of tradables, with indirect (secondary) effects on prices of items with a relatively inertial trajectory, such as core inflation and services. With disinflation under way, several countries embarked on a cycle of interest-rate cuts in 2022 and 2023, and those that did not do so, such as the United States, signaled that they would begin in 2024.
The labor market, which adjusts gradually, proved capable of shoring up household income for consumption, but this may slow the pace of the disinflation process. Strong growth of agricultural output in Brazil and its effects on other economic sectors were also drivers of GDP growth in 2023.
In the credit market, BOCOM BBM performed outstandingly in terms of very low loan delinquency rates, despite daunting challenges faced during the year, including bankruptcy filings that sparked heightened public interest and media coverage. We ended the year with non-performing loans at only 0.3% (E-H/expanded credit portfolio), thanks to systematic credit selection based on in-depth qualitative analysis and rigorous quantitative credit modeling developed and perfected over decades.
In 2023, we became the first financial institution in Latin America to participate directly in the Cross-Border Interbank Payment System. In line with our corporate mission, we joined CIPS to strengthen Brazil’s connection with China’s financial infrastructures, facilitating and lowering the transaction costs of bilateral foreign-exchange operations. As a result, already in 2023 we saw foreign-exchange settlement by our clients (BRL-CNY) jump to more than CNY 10 billion, up from less than CNY 0.3 billion in 2022.
For 2024, the ongoing cycle of interest-rate cuts in Brazil and favorable external conditions suggest that the economy will continue to grow, albeit at a slower pace. In the agribusiness sector, despite challenges here or there in 2024 such as a projected fall in the annual grain crop due to climate shocks affecting particularly Mato Grosso in late 2023, global demand for commodities remains stable. Moreover, important structural reforms passed by Congress in 2023, such as a tax reform, alongside several others passed in recent years, improve the long-term growth outlook for the Brazilian economy. Conjunctural and structural conditions place Brazil in an economically favorable position for the years ahead.
In 2023, we strengthened our corporate commitment to the well-being of our staff, clients and suppliers, as well as the local communities in which we operate. We continued to invest in and promote capacity building initiatives that foster the formation of citizens capable of surmounting the challenges currently faced by society, in line with the UN’s Sustainable Development Goals. We supported several projects of this kind through donations and sponsorships, particularly for the education and training of socially vulnerable people.
Among these are Arte Tech, a project run by the non-governmental organization Gamboa Ação for poor children in Gamboa, a neighborhood of Rio de Janeiro; and Instituto 42 Rio, an innovative school that trains professionals for an increasingly digital world. We also continued to partner with universities and courses that prepare professionals in strategic areas for the Bank, such as FGV’s Center for the Development of Mathematics and Science, which recruits talented youngsters from public schools across Brazil to take undergraduate and graduate courses at the institution, and the departments of economics at PUC-Rio and FGV, two centers of excellence in the area. We also supported the Global Hybrid Classroom, an online program of education developed by Tsinghua University to promote collaboration and an exchange of knowledge among educational institutions worldwide. In Brazil, the program is being implemented by the Federal University of Rio de Janeiro in courses on environment, governance and sustainable (ESG).
Finally, our Sustainability and Women’s Committees promoted important in-house initiatives during the year. We continued the series of lectures begun in 2022 and extended it to include discussions of sustainability and the economic impacts of climate change.
