Despite significant improvement, credit is unlikely to reach the 12 percent growth target this year. Economists are worried that the slow growth in 2013 would continue in 2014. For this reason, economic experts have offered proposals, regarding monetary policy for 2014. Report by Vietnam Economic News.

Credit needs to grow by just 10 percent in 2014?

The State Bank of Vietnam’s Money Policy Department Director Nguyen Thi Hong said, “The 12 percent credit growth target for this year can be adjusted to match realities. The credit growth has reached 7.18 percent so far this year and is expected to increase to 10-11 percent by the year’s end given that credit usually increases rapidly in the last months of the year. The State Bank will flexibly adjust credit growth targets for high-performing credit institutions and quickly resolve bad debts via the Vietnam Assets Management Company (VAMC).”

It is expected that the macro economy will improve in 2014 as a result of economic recovery. However, many economic experts warned of inflation again next year as a result of economic growth measures and the budget overspending rate increase to 5.3 percent.

They also said that businesses will still face difficulties and that to reach the economic growth rate of 5.8 percent next year, ministries and sectors need to take comprehensive measures to boost credit flows into the economy.

Small and Medium Enterprises Association Chairman Dr. Cao Si Kiem said that the State Bank of Vietnam has put in place money policy tools under the market principle, while ensuring publicity and transparency, which has received good response from the society, businesses and investors. However, systematic solutions are also needed to resolve problems, particularly bad debts.

Economist Dr Vu Dinh Anh said, “The macro economy will not change drastically next year and it will be ok to continue the money policy. The government should not loosen the money policy and set the credit growth rate of 12 percent. It is reasonable to increase credit by only 10 percent in 2014-2015 since both banks and businesses have realised their difficulties.”

“The most important thing for the Vietnamese credit system is not to grow but to improve the quality of credit and resolve bad debts, particularly stop new bad debts. In case that credit standards are loosened, the amount of bad debts will increase within three to six months," he stressed.

Temporarily using profits to resolve bad debts

Many said that the money policy still need to be flexible and stable and the struggle with bad debts should be accelerated. National Financial Monitoring Committee Deputy Chairman Truong Van Phuoc said that resolving bad debts meant that credit will be reduced and that the credit growth rate could be lowered to 9 percent. “We have used profits for the next three years to resolve national bad debts,” he said.

HSBC Vietnam General Director Summit Dutta said that establishing a bad debt management authority is a good solution in the current situation. Dr. Cao Si Kiem also said that resolving bad debts should still be a major task for next year. Without this, businesses will be unlikely to recover and banks will be unlikely to become stable.

Business Development Research Institute Director Dr. Le Xuan Nghia said that if banks resolve their bad debts, the credit growth rate will increase to 14-15 percent in the near future.

He also suggested that the State Bank of Vietnam pay special attention to resolving bad debts, strengthening international-standard management, increasing supervision and information publicity and transparency to enhance people’s trust in banks and the government’s money management policy.-VNA