Deputy Governor Dao Minh Tu. (Photo: VNA) Hanoi (VNA) - Experts predict improvement in Vietnam's economy in 2024, but economic growth still faces increasing risk as global demand declines, adversely impacting the industrial manufacturing and processing sectors. Meanwhile, inflationary pressures remain, and investment and consumption are down. These developments will continue to create numerous challenges for monetary policy management in 2024.
To stimulate commodity circulation, Dao Minh Tu, Deputy Governor of the State Bank of Vietnam said monetary policy will be managed in a flexible and proactive manner right from the beginning of the year, while closely monitoring market developments throughout the year to make appropriate responses.
- What are the reasons for credit difficulty, and how will these "bottlenecks" be tackled throughout the year? Additionally, what measures will the State Bank of Vietnam take to stimulate credit growth?
Deputy Governor Dao Minh Tu:
In 2023, credit growth was held back for a number of reasons. First, the downturn in investment, business production, and consumer demand led to a reduced demand for credit. Additionally, the real estate market's capacity to absorb credit weakened, with outstanding real estate loans comprising more than 21% of the total outstanding credit across the economy.
Furthermore, the capital market, including stocks and bonds, experienced difficulties as certain groups and businesses improperly issued and utilized bonds, which negatively impacted investor confidence.
The absence of transparency in the financial conditions of SMEs hampers financial institutions' capacity to accurately evaluate their true financial status and business activities.
The banking sector has actively implemented a variety of measures to alleviate challenges and enhance the capability of businesses and individuals to access credit.
Thanks to considerable efforts by the banking sector, by December 31, 2023, total credit in the economy saw growth of 13.71% compared to the end of 2022, nearly reaching the initial credit growth target of 14%-15% set by the State Bank for the year.
In 2024, to enhance the economy's capacity to absorb capital, the central bank introduced innovations in the management mechanisms for credit growth.
They will guide the reduction of costs to decrease interest rates for loans, eliminate unnecessary fees, aid businesses and individuals in their recovery and development efforts. The innovations also serve to swiftly evaluate projects and businesses to ensure the timely provision of credit to viable and effective projects, among other initiatives.
In addition to initiatives from the banking sector, it's crucial that all sectors stimulate investment and consumption, foster economic growth, and intensify trade promotion. They should also broaden export markets, refine the business environment, streamline administrative procedures, and ensure the fluidity of capital flows in the corporate bond market.
Meanwhile, enterprises should boost their ability to absorb capital by restructuring, enhancing management and governance, developing feasible business and production plans and projects, and ensuring financial transparency.
- Given the forecast of ongoing difficulties and challenges in both the global and domestic economies, what measures has the State Bank, as the monetary policy authority, implemented?
Deputy Governor Dao Minh Tu:
The global economy in 2024 is expected to persist with its slow growth trajectory amidst numerous uncertainties. Although inflation has shown signs of passing its peak, it remains elevated in many countries, prompting several central banks to keep interest rates high. Additionally, the prices of global commodities are at risk of experiencing significant volatility.
On the domestic market, economic growth is confronted with escalating risks due to a downturn in global demand, adversely impacting the manufacturing and processing sectors.
Concurrently, the persistence of inflationary pressures, along with challenges in investment and consumer activities, compound the difficulties. These factors collectively pose significant challenges and pressures on the management of monetary policy throughout 2024.
To ensure the stability of the monetary market, aid in inflation control, and bolster economic growth, the State Bank will keep a close eye on both domestic and international economic and monetary trends. This vigilant monitoring will enable the proactive, flexible, timely, and effective management of monetary policy tools, all aimed at driving economic growth towards the targeted range of approximately 6%-6.5%.
Moreover, the State Bank will maintain a flexible and proactive approach in managing open market operations, always prepared to bolster liquidity for the system of credit institutions. It will adjust interest rates in line with macroeconomic balances, inflation, and the objectives of monetary policy, while also encouraging credit institutions to further cut costs and reduce lending rates. This effort is aimed at aiding businesses in their recovery and development.
Furthermore, the State Bank will concentrate on managing the exchange rate to reflect market conditions, intervening in the market as required. It will coordinate various measures and monetary policy tools to ensure the stability of the foreign exchange market, thereby contributing to inflation control and the overall stability of the macroeconomy.
Additionally, the State Bank will manage credit harmoniously with macroeconomic developments to control inflation, stabilize the macroeconomy, and ensure the operational safety of credit institutions.
The State Bank will further advance digital transformation in banking and non-cash payment operations, addressing the needs for innovative business models, products, and services based on information technology platforms, digital banking, and digital payments. Additionally, it will enhance security and safety measures in payment processes and digital transformation efforts.
The bank will also continue to encourage financial institutions to expand their branch and transaction office networks in remote and underserved areas, where digital banking and modern banking services are less accessible, to ensure broader access to banking products and services for the population. This initiative aims to minimize the establishment of new branches and transaction offices in major cities and urban centers, promoting financial inclusion in more isolated regions.
- Thank you, Deputy Governor!
