The monetary easing policy will exert full effects by 2024

Dr. Nguyen Tri Hieu

How do you forecast the situation and level of credit growth in 2023?

Data on credit growth show that loan capacity, capital absorption and credit demand are still weak. Furthermore, interest rates are still high, the economy is still facing many difficulties, production and business have not really prospered, so many businesses do not want to borrow capital. At the same time, some businesses want to borrow money but it is difficult to access capital because they no longer have collateral and do not meet bank regulations.

Besides, banks are also very careful when deciding to lend due to the risk of bad debt. Normally, when risks increase, banks will apply high interest rates, but businesses want to reduce interest rates, so banks are in difficulty.

Therefore, it can be seen that the ability of businesses for borrowing capital is very low in 2023, so although reducing interest rates still has an impact, it has not resolved the ability of businesses to absorb capital, especially, real estate businesses.

With this situation, credit growth as of early December only reached over 9%, still very low compared to the 14% credit growth target for the whole year set by the State Bank (SBV). Therefore, there are currently many forecasts abour low credit growth for 2023, about 10-11%. In my opinion, this forecast is reasonable, even credit growth at 11% will be feasible and achievable, because 14% is very difficult, even not impossible.

To achieve higher credit growth for the rest of the year, in your opinion, what are the supporting factors?

Achieving credit growth as forecast above depends on many factors. Specifically, businesses are trying to find investment capital to achieve production and business targets in the last month of the year to help the whole year's business results "reach the finish ". Furthermore, the domestic and international markets are entering the peak holiday season, so demand will increase sharply. Once consumption increases rapidly, businesses and people will need to borrow more money, thereby promoting higher credit growth. In particular, lending interest rates are on a downward trend, so businesses and individuals who need to borrow are also "bigger borrowing" than before.

However, the banking industry also needs support with solutions to reduce interest rates, expand credit to priority sectors, offer preferential credit packages, and loosen some loan conditions, especially collateral. At the same time, the State Bank needs to take stronger and more drastic moves to promote the implementation of Circular 02/2023/TT-NHNN on extending debt and maintaining the same debt group for customers in difficulty, continuing to grant new loans, thereby increasing businesses' ability to access capital.

How do you assess the factors affecting monetary and credit policy in the coming time?

Around the world, the US Federal Reserve (FED) has not offered any interest rate cuts this year, so there is a high possibility that the FED may keep interest rates unchanged before the US Presidential election, the scenario of maintaining interest rates has a higher probability. This will help make the credit picture more positive. Furthermore, with monetary policies loosened in the last months of 2023, with a delay of 6 months, it will take until early 2024 to take full effect.

However, Vietnam should be careful with monetary policy, because loosening monetary policy is contrary to the world, especially when many central banks in the world continue to tighten monetary policy to implement anti-inflation policies. This can cause the exchange rate to increase and the value of the dong to decrease. But if the FED does not raise interest rates, it is possible that Vietnam's monetary policy will remain stable in terms of exchange rates and stability in the stock market.

Faced with the above context, to promote credit growth while still ensuring loan quality, the support and involvement of many parties is needed, which requires effective coordination between monetary policy and fiscal policy. The fiscal policy on tax and fee exemptions has now been issued and has many impacts to help increase aggregate demand, so this policy needs to be implemented more effectively. In addition, promoting public investment is also very important to take more capital into the economy, because this is a source of capital to stimulate consumption and promote economic growth. In addition, the intervention of credit guarantee funds should be increased so that banks can "aggressively" lend while still controlling bad debt.

On the other hand, the State Bank should make adjustments in credit management with credit growth limit s (room). Because currently, credit is managed according to the room assigned to each bank, leading to sometimes excess and sometimes shortage, not creating initiative for banks. Regarding credit and inflation, the State Bank still has other policy tools to manage, including interest rates, open markets and mandatory reserves. The State Bank has used tools such as open market and interest rates, but mandatory reserves have not been used by the State Bank. If we continue to use the credit room tool, the State Bank should have a clear set of criteria that are public, transparent, appropriate, and timely in its use and regulation.

Thank Sir!