BRASILIA, Reuters – Brazilian savings accounts experienced their largest outflow in five year in 2021 according to official statistics. This was due to worsening financial conditions for both families and businesses, which were affected by aggressive interest rates hikes and inflation of double-digit levels.

Brazilians increased their bank savings by net 7.7 Billion Reales in December. This is the lowest month-to-month ratio in six decades.

This brought the total annual outflow to 35.5 billion Brazilian reais ($6.23billion), the lowest figure since 2016. In Latin America, the largest economy in Latin America, the balance of savings accounts ended 2017 at 1.03 trillion RAI.

However, the record breaking 166.3 billion reais increase in savings accounts in 2020 was due to heavy government spending to fight the COVID-19 pandemic. This included cash transfers to the most vulnerable. The program, however, was significantly reduced in 2021.

Additionally, savings rates were less attractive than fixed income investments due to the increase in Selic’s benchmark interest rate and rising inflation.

Last year, the central bank tripled its benchmark rate to 9.25% from 2.2%. It has also signaled a 150-basis point increase in February.

In mid-December, the annual rate was 10.42%. That is much higher than what was set by central banks for consumers price inflation at 3.75%. Inflation has been more stubborn than expected, according to the central bank. This is due to higher fuel and energy prices.

($1 = 5.6963 reais)