Two scenarios for credit growth

In January 2021, credit growth reached 2.74%. 

The credit in January 2022 grew strongly compared to a year ago, because in January 2021, the credit growth rate was only 0.53% compared to the end of 2020.

In 2021, credit growth reached 13.53%. In that, credit for supporting industry achieved the highest growth with 21.52%, followed by credit for high-tech, which increased by 19.2%.

Credit for trade and services also achieved a fairly high growth rate with an increase of 14.1%, followed by industry and construction credit with an increase of 13.7%, and credit for agriculture and rural areas increased by 13.5%.

Credit to small and medium-sized enterprises has a lower growth rate than the average growth rate of only 11.98%. Credit for agriculture, forestry, and fishing also had a modest growth rate compared with the average rate of 8.68%.

Recently, the Prime Minister requested the banking sector to closely coordinate with other ministries and localities to well perform tasks and solutions to prevent and control the epidemic in the spirit of the government's resolutions. In addition, the banking sector must continue to make an important and effective contribution to maintaining macroeconomic stability, controlling inflation, stabilizing the money and foreign exchange markets, and serving the smooth operation of businesses and people, especially effectively serving the program for socio-economic recovery and development.

In the past year, the SBV issued Circular 10/2021/TT-NHNN stipulating that the refinancing interest rate would be cut to 0%/year, contributing to boosting credit higher than expected. At the same time, the gradual recovery of production activities also increases credit demand.

Meanwhile, the gap between means of payment and credit has narrowed, showing a marked improvement in capital utilization despite the impact of COVID-19. A rise in interbank transactions showed abundant liquidity, while capital demand was moderate.

Given that Vietnam's inflation has been quite stable when economic growth slowed down, SBV will have more incentive to maintain the current policy. In addition, the news that the Fed is expected to raise interest rates three times, from 0%-0.25% to 0.75%-1% in 2022, will partly increase interest rate pressure on the SBV. In the context of economic re-opening, the macro foundation has been restored, and vaccine coverage is becoming wide enough to raise credit demand.

Therefore, BSC has established two main scenarios for credit growth and M2 for 2022.

First, the fast pace of tight monetary policy and flat rate inflation will put a lot of pressure on SBV's current loosening policy. This phenomenon will make M2 and credit grow at the same rate as in 2020–2021. M2 and credit are expected to increase by 12.0% and 13.0%, respectively.

Second, the slow pace of monetary policy with low inflation will put less pressure on the SBV to raise interest rates. The stable monetary context could create stable conditions for SBV to raise interest rates, and credit growth will be above the average levels of the period 2020 and 2021. M2 and credit are estimated to increase by 14.0% and 13.0%, respectively.