In the first half of 2014, lending rose by 3.52 percent compared with the same period last year. Although it fell short of expectations, there is still hope that the credit growth target for the whole year can be achieved, given the economy is showing signs of recovery.
Deputy Governor of the State Bank of Vietnam (SBV) Nguyen Dong Tien spoke with Nhan Dan (People) newspaper about the issue.
*What do you think about the results achieved by the SBV and the banking system in the first half of the year?
Based on the National Assembly and Government goals of maintaining macroeconomic stability, curbing inflation, achieving reasonable growth and improving the competitiveness of the economy, since the early months of the year, the SBV has proactively employed a synchronous set of monetary instruments to regulate the money supply, in order to control inflation, support liquidity of credit institutions and stabilise the currency market.
The SBV also adjusted the exchange rate in line with developments of foreign currency supply and demand, raising the exchange rate by 1 percent to help stimulate exports as well as continuing measures aimed at removing difficulties for enterprises, facilitating credit institutions’ efforts to boost their lending and resolve bad debts.
In general, the currency market and banking activities in the first half of 2014 underwent positive and stable developments in accordance with SBV orientations. Inflation was kept at a low level, as consumer prices in June rose by 1.38 percent against the end of 2013 and 4.98 percent compared with a year earlier. The one-month price gain in June was the smallest in 13 years.
The liquidity of the credit institution system was ensured and improved. The average deposit and lending rates dropped by 0.5 – 1.5 percentage points compared with the end of 2013 and were equal to those during the 2005-2006 period. Exchange rates, the foreign currency and gold market were stable. In the first six months of the year, the SBV purchased a large amount of foreign currency to increase foreign reserves to a record 35 billion USD.
Large foreign reserves enabled the SBV to regulate the exchange rate and foreign currency market in a more proactive and effective way. Measures to tackle bad debt through the Vietnam Asset Management Company began to produce results. In addition, the SBV’s monetary policy continued to receive public support, thanks to effective communications through the mass media.
*Despite these achievements, it is undeniable that credit growth was still slow. What do you think about this?
In the early months of 2014, the economy showed signs of improvements but many enterprises were still struggling. At the end of June 2014, lending rose by a modest 3.52 percent over the end of 2013, which was attributed to seasonality, weak demand from enterprises which did not dare to borrow due to slow sales of their products and reduced profits.
In addition, Vietnam’s key exports were affected by slow global economic recovery and instability in some regions of the world. Moreover, management and financial capacity of Vietnam’s small and medium enterprises has yet to improve, which made them ineligible for borrowing from banks.
Therefore in order to boost credit to the economy, there should be greater collaboration between different macroeconomic policies and specific measures to support enterprises, in addition to the banking sector’s effort.
However, we should recognise that credit growth was accelerating in recent months. Positive economic data showed that production was recovering and credit growth is expected to pick up in the final months of the year. So it is highly likely that Vietnam can achieve its credit growth target of 12-14 percent for the whole year.
*Since the start of the year, the banking sector has implemented a range of measures to boost credit growth, some of which are loan programmes for construction projects and agricultural production. Can we expect these measures to help accelerate credit growth so that the target of 12-14 percent can be achieved?
Loan programmes for property development and agricultural production have great significance to the economy for the time being. For the property sector, the programme will help boost sales of properties and construction materials. So far BIDV, SHB and Vietinbank have pledged to lend over 6 trillion VND (282 million USD) to construction and road projects.
For agricultural production, the programme will encourage cooperation between farmers and traders, deployment of advanced technology and large-scale production as well as an export boost. So far there have been 11 agricultural projects eligible for bank loans and the amount pledged by banks was estimated at 2.7 trillion VND (127 million USD).
It can be said that these lending programmes are not only drastic measures that the banking sector has been implementing to achieve the 2014 credit growth target, but also reflect the banking sector’s consistent orientations in implementing credit policies to support sustainable economic development and strengthen collaboration between credit institutions in controlling the money flow, enhancing the quality of credit and reducing bad debt.-VNA
Deputy Governor of the State Bank of Vietnam (SBV) Nguyen Dong Tien spoke with Nhan Dan (People) newspaper about the issue.
*What do you think about the results achieved by the SBV and the banking system in the first half of the year?
Based on the National Assembly and Government goals of maintaining macroeconomic stability, curbing inflation, achieving reasonable growth and improving the competitiveness of the economy, since the early months of the year, the SBV has proactively employed a synchronous set of monetary instruments to regulate the money supply, in order to control inflation, support liquidity of credit institutions and stabilise the currency market.
The SBV also adjusted the exchange rate in line with developments of foreign currency supply and demand, raising the exchange rate by 1 percent to help stimulate exports as well as continuing measures aimed at removing difficulties for enterprises, facilitating credit institutions’ efforts to boost their lending and resolve bad debts.
In general, the currency market and banking activities in the first half of 2014 underwent positive and stable developments in accordance with SBV orientations. Inflation was kept at a low level, as consumer prices in June rose by 1.38 percent against the end of 2013 and 4.98 percent compared with a year earlier. The one-month price gain in June was the smallest in 13 years.
The liquidity of the credit institution system was ensured and improved. The average deposit and lending rates dropped by 0.5 – 1.5 percentage points compared with the end of 2013 and were equal to those during the 2005-2006 period. Exchange rates, the foreign currency and gold market were stable. In the first six months of the year, the SBV purchased a large amount of foreign currency to increase foreign reserves to a record 35 billion USD.
Large foreign reserves enabled the SBV to regulate the exchange rate and foreign currency market in a more proactive and effective way. Measures to tackle bad debt through the Vietnam Asset Management Company began to produce results. In addition, the SBV’s monetary policy continued to receive public support, thanks to effective communications through the mass media.
*Despite these achievements, it is undeniable that credit growth was still slow. What do you think about this?
In the early months of 2014, the economy showed signs of improvements but many enterprises were still struggling. At the end of June 2014, lending rose by a modest 3.52 percent over the end of 2013, which was attributed to seasonality, weak demand from enterprises which did not dare to borrow due to slow sales of their products and reduced profits.
In addition, Vietnam’s key exports were affected by slow global economic recovery and instability in some regions of the world. Moreover, management and financial capacity of Vietnam’s small and medium enterprises has yet to improve, which made them ineligible for borrowing from banks.
Therefore in order to boost credit to the economy, there should be greater collaboration between different macroeconomic policies and specific measures to support enterprises, in addition to the banking sector’s effort.
However, we should recognise that credit growth was accelerating in recent months. Positive economic data showed that production was recovering and credit growth is expected to pick up in the final months of the year. So it is highly likely that Vietnam can achieve its credit growth target of 12-14 percent for the whole year.
*Since the start of the year, the banking sector has implemented a range of measures to boost credit growth, some of which are loan programmes for construction projects and agricultural production. Can we expect these measures to help accelerate credit growth so that the target of 12-14 percent can be achieved?
Loan programmes for property development and agricultural production have great significance to the economy for the time being. For the property sector, the programme will help boost sales of properties and construction materials. So far BIDV, SHB and Vietinbank have pledged to lend over 6 trillion VND (282 million USD) to construction and road projects.
For agricultural production, the programme will encourage cooperation between farmers and traders, deployment of advanced technology and large-scale production as well as an export boost. So far there have been 11 agricultural projects eligible for bank loans and the amount pledged by banks was estimated at 2.7 trillion VND (127 million USD).
It can be said that these lending programmes are not only drastic measures that the banking sector has been implementing to achieve the 2014 credit growth target, but also reflect the banking sector’s consistent orientations in implementing credit policies to support sustainable economic development and strengthen collaboration between credit institutions in controlling the money flow, enhancing the quality of credit and reducing bad debt.-VNA
