Vietnam’s credit reached about VND12,560 trillion ($522.14 billion) in the year to August 29, up only 5.33% from the end of last year, said standing Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu on Thursday.
The figure was low compared to an increase of 9.87% in the same period last year, he told a cabinet meeting on solutions to facilitate enterprises' credit access and the economy's ability to absorb capital.
However, credit rose again in August after a slowdown in July, Tu noted, adding that the July credit growth was 4.56% lower than in June.
Currently, the entire banking system is focusing on treating “the disease of excess money", he said.
According to the deputy governor, the SBV and the whole banking system have organized multiple conferences to promote connections between banks and businesses, listen to public opinion, review and improve legal institutions, implement reforms, promulgate support policies, and reduce lending interest rates.
"However, the supply of credit to the economy has still faced difficulties as businesses cannot absorb capital and do not want to borrow money," he stated.
The SBV also said that the liquidity of the credit institution system is redundant and there is still a lot of room for credit growth (about 9% left, equivalent to about VND1,000 trillion or $41.57 billion).
The SBV proposed four groups of solutions, including stimulating investment and consumption while promoting growth drivers; developing the corporate bond and real estate markets; improving businesses’ capacity and ability to absorb capital; and solutions on currency, credit, and interest rates.
According to Mirae Asset Securities (Vietnam) JSC, current credit growth is much lower than the 2023 target of 14% set by the central bank, and is at its second lowest rate in the past decade.
The broker said that the main reason is high lending interest rates. Although the SBV has cut policy interest rates many times in the first half of this year, totalling 1.5 percentage points, lending rates remain at a high level, limiting borrowing demand.
In addition, economic difficulties persist, leading to low credit demand for business expansion and investment activities, it added.
Nguyen Duc Lenh, deputy director of the SBV branch in Ho Chi Minh City, also attributed the low credit growth compared to the same period in the previous years to low capital demand in the economy.
Difficulties facing the market, enterprises, business households and cooperatives have a certain influence on capital circulation and the need to expand business activities. “These things have direct impacts on credit demand and credit growth,” he noted.
According to the SBV branch in HCMC, to make monetary policy more effective while promoting credit and economic growth, it is still necessary to continue implementing support solutions regarding consumer markets, import-export activities, and the business environment.
This will create faster, stronger and positive effects on the growth pillars of the economy such as investment, export and consumption, Lenh said, noting credit demand will increase when these activities improve.
In particular, investment and consumption will recover more quickly if synchronous solutions and policy coordination prove effective, he added.