Experts suggest loosening credit limits to support SME economic recovery hinh anh 1 Illustrative image. (Photo: VietnamPlus)

Hanoi (VNA) - Credit growth momentum is forecast to be more positive this year than in 2021 due to the State Bank of Vietnam (SBV)’s flexible management policy. The focus is to control inflation, while keeping the macro-economy stable to underpin and support economic growth.

Data from the SBV showed that by February the credit of the banking sector increased by 1.82% compared to the end of 2021. It was lower than 2.74% recorded at the end of January, thus, the credit balance in February declined by 96 trillion VND (4.1 billion USD) month-on-month. The decrease in credit balance could be attributed to the fact that credit demand usually increases sharply before Tet (Lunar New Year) holiday which fell on February 1 and declined after Tet.

The outstanding credit balance reached 10.4 quadrillion VND by the end of last year, according to SBV.

In the first two months of the year, the banking sector injected more than 190 trillion VND of credit into the economy.

Experts also gave a positive forecast on the credit growth scenario this year. According to a report by BIDV Securities Company (BSC), credit demand in 2022 will continue to be high and may increase by 14% driven by post-pandemic economic recovery. In addition, the support package which is estimated at 350 trillion VND in the next 2-3 years also contributes to credit growth.

Experts of SSI Securities Corporation expect credit growth to hit 14%-15% in 2022. As for Bao Viet Securities Company, it could hit as high as 15% on the year as an interest subsidy of 2% per annum on commercial loans for the 2022-2023 period worth 40 trillion VND - part of the Government’s economic recovery programme – will aid many businesses and households who are heavily affected by the pandemic.

As the country’s economic engine, by the end of February, the total outstanding balance of credit institutions in Ho Chi Minh City was estimated at over 2.93 quadrillion VND, up 1% compared to the end of January and up 3.54% year-on-year.

This growth shows that the city’s economy has recovered quite strongly because it saw a two-fold increase compared to the national average.

The SBV sets a credit growth target of about 14% for 2022, against 13.53% of 2021. Credit allocation to sectors will be made in line with the credit growth limit for each bank and other operating options.

Should credit limits be extended?

Recently, a working group of the Vietnam Business Forum (VBF) suggested the SBV consider expanding the credit limits so that banks can give more support to businesses, especially small and medium enterprises when needed.

According to expert Nguyen Tri Hieu, the demand for capital of enterprises is expected to increase in the coming months.

The widening credit rooms for banks will benefit customers and businesses as well as help the economy recover better, Hieu said.

It is necessary for the SBV to remove the credit limit so that each bank can decide on its own business plan, he said, adding that it is possible for a bank to increase the credit to 10%-20% if they can mobilise capital and still comply with the target set by the SBV.

Meanwhile, other experts said that with the loosening of credit at the moment, banks will have more opportunities for new loans and preferential credit packages. Recently, banks have strongly focused on maintaining and revitalising production and business activities of enterprises when the economy recovers.

The leader of a commercial bank, who asked to remain anonymous, said that the credit limit that the SBV grant to banks is quite small, adding that normally, it depends on the ratings of credit institutions.

He also said that the SBV will periodically review and adjust credit growth targets for each credit institution on the grounds of its operation, financial capacity and healthy credit growth ability./.