Vietnam credit growth slow despite rates back to pre-pandemic levels

Lending interest rates have returned to pre-pandemic levels, but Vietnam’s credit has still expanded slowly at only 7.1% so far this year, said State Bank of Vietnam (SBV) Governor Nguyen Thi Hong.

Responding to legislators at a Wednesday discussion on the socio-economic situation as part of the National Assembly’s ongoing session, Hong affirmed that 2023 continues to be a year full of difficulties and challenges derived from the complex and unpredictable developments of the world economy.

Domestically, the internal problems of the economy cannot be resolved in a short time, placing pressure on the central bank's monetary policy management, especially when it must perform multiple tasks such as controlling inflation, supporting economic growth, reducing interest rates, stabilizing the currency and foreign exchange markets, and ensuring the safety of the banking system, she added.

According to the governor, in 2023, the SBV has showed flexible management of credit, both in supply and demand.

Regarding credit supply, at the beginning of 2023, the SBV set a credit growth target of 14% for the whole year and allocated credit quotas to all credit institutions in the system by the middle of the year. At the same time, it has managed the monetary policy flexibly to support the system liquidity, creating conditions for credit institutions to increase credit supply for the economy.

In terms of demand, the central bank has made four policy interest rate cuts to bring rates on new loans down by about 2 percentage points compared to the end of last year.

“The lending interest rates are now equal to or about 0.3 percentage points lower than pre-Covid levels,” Hong noted.

The SBV has issued a circular on restructuring debt repayment terms and keeping debt groups unchanged as well as proposing credit packages, including a VND120 trillion ($4.88 billion) housing credit package for low income earners and workers and another for seafood producers, worth VND15 trillion ($610 million).

All of these solutions have contributed to boosting credit demand, she said, adding the SBV has coordinated with localities to organize conferences connecting banks and businesses to remove difficulties and obstacles in accessing credit.

Despite such great efforts, as of October 27, credit increased by only 7.1% compared to the end of 2022, Hong noted, adding that the government and the SBV held many seminars to find out the causes of low credit growth.

The governor said that under the drastic direction of the government and the Prime Minister, ministries and agencies are implementing synchronous solutions such as promoting trade to increase export orders and boosting domestic demand.

The Prime Minister established a working group in charge of removing difficulties for real estate. The working group and the Ho Chi Minh City Real Estate Association have identified that 70% of the problems facing the property market stem from legal issues. Currently, ministries, agencies and localities are taking drastic measures to remove these difficulties, Hong said.

“Once legal issues are cleared, credit will certainly increase,” she stressed.