Credit growth of Vietnam's banking system reached 1.31 percent from January to May 23.

"This situation is partially due to seasonal factors. Credit demand in the first half of the year is normally low," Head of the Monetary Policy Department under the State Bank of Vietnam (SBV) Nguyen Thi Hong announced at the monthly press meeting on May.

Hong stated that as the system had an abundant capital source, coupled with lower borrowing costs, credit demand will surge in the latter part of the year.

"The entire target of credit growth [12-14 percent] will be probably achieved," she added.

In the first five months, the total supply was an estimated 5.28 percent higher than the end of last year. Meanwhile, the total mobilised capital increased by 4.2 percent.

In May, borrowing costs were trimmed by 0.5 percentage point while deposit interest rates were lowered by 0.5-1.5 percentage points against 2013. Loans for privileged sectors enjoyed 1 percent cut interest rate.

Responding to questions about the possibility of a lower interest rate towards the year-end, Hong stated that it should depend on the actual movements of the economy and inflation. If inflation continues its downtrend, lenders may cut additional 0.5 percentage point.

Chief Inspector of the SBV Nguyen Huu Nghia stated that in the first five months, Vietnam Assets Management Company (VAMC) had bought additional 6.3 trillion VND (298.58 million USD) that raised the total purchased debts to 45.63 trillion VND (2.16 billion USD).

Earlier this year, VAMC had planned to buy 10 trillion VND (474 million USD) in the first quarter. Nghia pointed out that this was because of slow policymaking procedures, allowing VAMC to issue special bonds.

To date, credit institutions have submitted applications to sell over 30 trillion VND (1.42 billion USD) to VAMC. VAMC is planning to raise the total purchased debts to 70-100 trillion VND (3.32-4.74 billion USD) by the year end.-VNA