Credit stimulus toward the end of the year

Many analysts believe that in order to reach this aim, credit stimulation must be delivered throughout the remainder of the year.

Credit grew by only 9%

Speaking at a press conference to discuss banking performance in 3Q24, Mr. Dao Minh Tu, Deputy Governor of the State Bank of Vietnam (SBV), stated that loan growth in the Vietnam banking system until September 30, 2024 has expanded by around 9% since the end of 2023. This amount is far higher than almost 7% in the same period last year, and when compared to 6.63% at the end of August, credit has risen significantly in the previous month.

However, the current loan growth rate remains much below the SBV's aim of 15% for this year. That also means that in order to meet the objective, credit must rise by 2% every month on average throughout the last three months of the year.

That is difficult given that the average credit growth rate in the first nine months of this year has been less than 1% each month. Even if we look closely at credit developments in the first few months of the year, we can observe that credit growth has been negative for several months.

According to SBV figures, loan growth by the end of June 2024 reached 6.1% compared to the end of 2023 and 15.3% compared to the same time the previous year. However, at the end of July 2024, loan growth had declined again, expanding by just 5.7% compared to the end of 2023 and 15% compared to the same period last year.

Meanwhile, it cannot be denied that in recent years, the SBV has developed several solutions to help enterprises and individuals get bank loans, thus helping to the recovery of production and business and fostering economic growth.

As a result, the SBV has maintained policy rates steady to allow credit institutions (CIs) to get money from the SBV at a reasonable cost, lowering lending rates and supporting the economy. The SBV also urged CIs on a monthly basis to continue reducing operational expenses in order to lower lending rates. In particular, to encourage CIs to provide loans for the economy, the SBV has allotted the whole credit ceiling from the beginning of the year...

In addition, the SBV has prolonged Circular 02/2023/TT-NHNN on debt restructuring and debt group maintenance for another 6 months, therefore actively supporting credit development.

Matching credit supply and demand

Many analysts also praised the SBV's efforts to manage monetary policy, which has helped keep interest rates low in order to assist individuals and companies in resuming production and operations. Indeed, according to the Government's report at the 8th session of the 15th National Assembly, commercial banks' average loan rates have reduced by 0.86% since the end of 2023.

Meanwhile, the financial system's liquidity is quite high, and banks are even "stockpiling" capital. The SBV released credit notes worth VND12,300 billion on October 18, following a two-month moratorium.

Why is loan growth still modest despite the banking system's plentiful liquidity and low interest rates? The fundamental reason is that credit demand and the economy's ability to absorb capital remain low due to ongoing challenges in corporate output and activity. The fact that 163,800 enterprises left the market in the first nine months of this year, up 21.5% from the same time last year, serves as confirmation.

To stimulate credit growth in the last months of this year, many analysts believe a credit stimulus is required to match credit supply and demand. As a result, it is necessary to remove barriers to production and business activities; encourage large enterprises to support and promote small and medium-sized enterprises in creating domestic value chains and developing domestic supporting industries; remove barriers to support packages as soon as possible; and promote the recovery of the real estate market, which will lead to the recovery of many sectors, thereby increasing credit demand.

If the aforementioned measures are effectively implemented, Dr. Nguyen Huu Huan - Ho Chi Minh City University of Economics, believes that credit will grow faster in the final months of this year, especially when economic growth is expected to be stronger, as well as seasonal factors.

Dr. Can Van Luc, a member of the National Monetary and Financial Policy Advisory Council, also stated that credit would continue to rise rapidly in the coming years because economic growth is expected to be around 6.7% in 2024; the real estate market has improved, boosting credit demand for real estate investment...