XP Inc: Brazil's New Payroll Loan Program Will Boost GDP by 0.6%

Core Insights - Brazil's newly launched payroll-deductible loan program for private sector workers is projected to add approximately 0.6 percentage points to GDP growth, equating to nearly BRL 70 billion (around USD 11.7 billion) annually [1][2] - The program, initiated on March 21, 2025, aims to provide affordable credit to 47 million formal employees, including household and agricultural workers, through the Digital Work Card app [2] - Strong demand for the loans is evident, with over BRL 4.5 billion (approximately USD 750 million) in loans granted shortly after the program's launch [2] Economic Impact - The program is viewed as a strategic macroeconomic lever, allowing households to replace high-cost debt with lower-interest payroll loans, thereby increasing disposable income and stimulating consumption [3] - XP has revised Brazil's GDP growth forecast for 2025 from 2.0% to 2.3% and for 2026 from 1.0% to 1.5%, with an optimistic scenario suggesting a potential increase of up to 1.0 percentage point in GDP growth if adoption accelerates [3] - The program is expected to soften the impact of global economic challenges and tighter monetary conditions, showcasing the resilience of Brazil's economy [4] Mechanisms of Impact - The analysis identifies two key transmission effects: - A substitution effect where consumers replace expensive debt with cheaper loans, leading to a GDP impact of +0.35 percentage points [5] - An incremental effect where increased credit access stimulates consumption-led lending growth, contributing an additional +0.2 percentage points to GDP [5]