The State Bank of Vietnam (SBV) says they will have the maximum credit growth of up to 30 percent in response to market demands as long as they ensure the security of the financial index.
However, the new mechanism may also affect targets to maintain the credit growth at 8-10 percent by the end of this year.
By the end of June 2012, the bad debt ratio in the banking sector had increased significantly, causing many banks to focus on restructuring their loans and raising service quality, in lieu of expanding their credit facilities.
There is hope that the current decline in interest rates will stimulate the credit growth in the remaining months of this year.
As Vietnam is still confronted with numerous difficulties such as slow production, weak purchasing power and high inventory levels. The credit growth of the banking sector will depend much on the recovery of the national economy, as well as the results of settling bad debts.
In the first seven months of this year, the banking sector’s credit growth remained relatively low, just at around 1.06 percent.
In the face of increasing bad debt ratios, the banking system will have to make greater efforts to ensure credit growth at 8-10 percent as expected.
Judging by the 4 percent GDP growth rate in the first half of 2012, both domestic and foreign economists forecast that the credit growth will likely be in single-digit figure and inflation will be kept below 10 percent in the second half, even into the new year.
The SBV said that its recent decision on credit growth expansion will not affect measures to curb inflation. Whether the set target for credit growth can be achieved or not depends on how to attract investment, stimulate consumption power and reduce inventory levels.
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