With credit growth showing a marked rise in the second quarter, the State Bank of Vietnam's target of 12-14 percent for the year seems likely to be realised.

From only 1.8 percent after the first two months, the Commercial Joint Stock Bank for Foreign Trade of Vietnam's credit growth rose to 3.16.percent by the end of May.

The Military Joint Stock Commercial Bank has reported lending growth of around 6 percent and deposit growth of 10 percent.

The SBV's HCM City office said as of May 31 outstanding medium- and long-term credit in the city had increased by 3.16 percent this year.

Dang Ngoc Khanh, General Director of SeAbank, said his bank expected credit growth to top 6 percent in the first half of the year, or 50 percent of the year's target.

Analysts at the Viet Capital Securities Joint Stock Company said the central bank's credit growth target of around 13 percent for the year appears feasible.

Khanh said his bank recently signed many large credit deals with companies and was waiting to disburse the sums, he said. The bank has also lent hundreds of billions of dong in retail loans, he said.

He attributed the rising credit demand due to positive changes in the economy.

Business activities are recovering while inventories are decreasing, the housing market is reviving, and exports are rising, he explained.

Economists agreed, saying that the recovery in credit growth was also due to the fact that the measures adopted by the central bank to help companies battle their difficulties have begun to take effect.

Two of the most productive measures were to lower lending interest rates and bring banks and companies closer together, they said.

The central bank had urged banks to cut interest rates on businesses' old debts to below 13 percent and the current rate cap for priority sectors from 9 percent to 8 percent.

As a result, by May 25 interest rates were cut by 0.5-1.5 percent from the levels recorded late last year.

Dr Tran Hoang Ngan, a senior banking expert, told Thoi Bao Kinh Doanh that "the recent cuts in interest rates are reasonable. But it would be better for credit growth if the rate is further cut by 0.5-1 percent."

He also stressed the need for measures to improve aggregate demand in the economy, and help companies access banks loans to ensure credit growth.

Analysts said since 96 percent of the companies in the country are small or medium-sized, and most of them face difficulties with administrative procedures and assets to be pledged to borrow from banks, the Government needs to assist them.

If businesses manage to overcome their difficulties they would become stronger and contribute to the recovery of the economy and improving aggregate demand, they added.-VNA