Vietnam credit growth sees Jan-Sept upswing to 8.53%

Total outstanding loans in the Vietnamese banking system grew 8.53% in the year to September 27, up from a 6.24% expansion in the same period last year, according to the General Statistics Office (GSO).

The GSO says that credit institutions pumped an additional VND1.16 quadrillion ($46.7 billion) into the economy in the nine-month period.

The country’s central bank, State Bank of Vietnam (SBV), has said that credit growth stood at 6.63% as of August 26 and 7.38% as of September 17 compared to the end of last year. Based on this, lending expanded 1.15% in 10 days (Sept 17-27).

Meanwhile, deposits at credit institutions posted slower growth, having risen 4.79% as of September 27 from end-2023, decelerating 6.63% year-on-year.

Furthermore, total money supply (M2) increased 5.1% in the nine-month period, approaching last year’s 5.4%.

This year’s increase in credit growth is attributed to the fact that right at the start of the year, the SBV assigned credit growth quotas to banks for the whole year instead of doing so in several tranches as it had done in the previous year.

Furthermore, in an August move to stimulate lending, the SBV allowed banks that had already completed 80% of their credit quotas for the year to exceed their quota based on their individual rating.

The SBV has set a credit growth target of 15% for this year.

After the U.S. Fed cut rates last month for the first time in three years, the SBV got more aggressive in monetary loosening.

As of September 27, outstanding volume on the open market operation (OMO) channel stood at VND67,359 billion ($2.72 billion), the strongest net-injection position since February 2023.

Late last month, the International Monetary Fund (IMF) suggested that fiscal policy should take the lead in supporting Vietnam’s economic activity if needed, given ample fiscal space and limited room for monetary policy loosening.

Tim Leelahaphan, economist for Thailand and Vietnam with Standard Chartered Bank, said last weekend that the SBV may not increase its policy interest rates by 50 basis points as expected in Q4/2024 given recent lower inflation, VND appreciation in Q3, and expected economic moderation.