Why credit only grows by 14pct in 2018?

10-Jan-2019 Intellasia | Vietnam Finance | 6:00 AM Print This Post

Deputy Governor of the State Bank of Vietnam (SBV) has given answer for this question at a press conference held by the SBV in the morning of January 7th 2019.

According to the SBV’s statistics, by the end of 2018, the credit growth of the entire system reach 14 percent compared to the end of 2017. In particular, the credit growth and proportion of credit compared to the entire system were respectively 8.88 percent and 9.56 percent for agriculture, forestry and fishery sector; 12.1 percent and 31 percent for industry and construction sector; 15.9 percent and 59.4 percent for commerce and service sector (in which the outstanding loans of wholesale, retail and repair of automobiles, motorbikes and other motor vehicles grew by 26 percent and accounting for 34 percent in the whole sector).

In addition, the credit to priority areas saw fairly good growth, including 15.5 percent for “Tam Nong”, accounting for 24 percent; 13.5 percent for small and medium enterprises, accounting for 18 percent; 2.5 percent for export sector; 17 percent for supporting industries; and 0.3 percent for high-tech application sector.

Continuing the “tradition” of banks connecting with businesses to remove obstacles, in 2018, the entire banking sector organised 370 meetings and dialogues. As a result, the new disbursement value reached 700 trillion dong; banks extended loans, restructured repayment terms, and reduced interest rates for nearly 45 trillion dong for businesses and some other customers.

One of the most concerned issues at the press conference is why the credit growth target was set at 17-18 percent at the beginning of the year but only reached 14 percent by the end of the year. Answering this question, the SBV’s deputy Governor Nguyen Thi Hong said that to support the economic growth, the capital for the economy includes difference sources such as state budget, foreign capital, but bank credit remains the main source.

In 2018, the SBV determined that credit only focused on priority areas and strictly controlled the general growth rate, including real estate credit and consumer credit.

“The 14 percent credit growth is a suitable for the current context when the credit size of Vietnam is currently over 130/GDP/ This level has been recommended by many international organisations when assessing the credit rating of Vietnam”.

Thus, according to Hong, the SBV’s Governor instructed to direct capital into production and business areas, particularly priority areas under the direction of the government and controlled risks. In fact, although the realised credit growth is far below the target, the economic growth is still 7.08 percent.

Regarding the increase of interest rates in the end of the year, Hong explained that since the capital demand rises in the end of the year, credit institutions (CIs) have to balance the liquidity for the economy, but the increase is not high. “In early 2018, the increase in interest rate level was low and some CIs even reduced interest rates, thus the interest rates rose up in the end of the year. Considering the whole year, interest rates only increased slightly,” said Hong.


Category: Finance, Vietnam

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