Vietnam credit growth moves sluggishly towards annual target: central bank

Vietnam’s credit growth had reached only 7.38% as of September 17 against the end of last year, compared with the 15% target for the whole 2024, according to the State Bank of Vietnam.

While the growth was still far from the target, it was higher than the 5.73% recorded in the same period last year, the central bank (SBV) said.

Notably, private commercial banks saw a credit expansion of 8.6% and accounted for 45% of the market share, the highest in the entire system.

Highlighting more positives, SBV Deputy Governor Pham Quang Dung said credit growth across various sectors had improved compared to the same period in 2023, and credit structure has aligned with the economic restructuring goals with positive growth in credit for trade and service sectors, making up 50% of the system’s total outstanding loans.

Credit has continued to go into production and business activities, with consumer credit recovering. Outstanding loans for living needs and credit card loans expanded 4.93% as compared to a 0.2% decrease in the same period last year, he noted.

On August 28, 2024, the SBV announced additional credit growth quotas for credit institutions. Based on their ranking, banks that have their credit quotas assigned at the start of this year 80% filled up would have their credit quotas proactively adjusted by the central bank.

However, the announcement has not shown much impact. Overall credit growth rose by just 0.75 percentage points (from 6.63% as of August 26 to 7.38% as of September 17).

Non-performing loans up

Dung said non-performing loans and potential bad debts were on the rise, with risk increasing following the extension of repayment deadlines and keeping debt categories unchanged.

The demand for credit from businesses and individuals was low as many companies have reduced or halted production due to lack of orders, and some have even dissolved and/or shut down, he said.

Tightening of consumer spending has also resulted in lower credit demand, he added.

Dung said further that pressure on bank credit remained high as other capital raising channels in the economy were facing difficulties.

The real estate market has yet to recover, affecting various related sectors and housing demand. Slow global economic growth, complex international market development, and high interest rates were also impacting domestic interest rates and exchange rates.

Besides, natural disasters and flooding have caused significant damage, affecting the livelihoods and business operations of clients, leading to difficulties for commercial banks.

In addition to the banking sector's proactive measures to support credit growth in the remaining months of the year, the SBV deputy governor emphasized the need for comprehensive policies from ministries, sectors, and localities.

Specific actions needed include improving the business environment, reinforcing market confidence in economic recovery and growth, restoring companies' investment expansion expectations, and promoting consumer spending.

Legal frameworks should be refined to facilitate the enforcement of recently amended laws and remove legal barriers for projects. “Especially, civil economic relations should not be criminalized,” Dung said.

The central bank official also stressed the need to encourage traditional growth drivers such as investment, consumption, and exports. Public investment disbursement should be accelerated, social investments enhanced, high-quality FDI lured, and trade activities promoted.

Efforts to stimulate domestic consumption demand should be continued, Dung said.

He called for effective implementation of taxes and fees including land use fee exemptions, reductions and payment extensions. Stepping up efforts to remove difficulties for the stock, corporate bond and real estate markets was also critical.

“Maintaining stable prices of government-controlled items is necessary to ease inflationary pressures and ensure the operational efficiency of businesses and individuals,” Dung said.

He also stressed the need to enhance capital absorption capacity of enterprises through supporting mechanisms, such as small and medium-sized enterprise (SME) guarantee funds and SME development funds.