Hanoi (VNA) - Flourishing production and business activities in various sectors and a warming real estate market are the driving forces that increased credit growth, thereby contributing to the growth of the country’s gross domestic product (GDP) in the first half of 2024.
Money flow circulated
Statistics released by the State Bank of Vietnam (SBV) show that credit growth rose by 6% compared to the end of 2023. In June alone, banks lent more than 480 trillion VND (18.88 billion USD) to economic entities, higher than the total sum in the first five months of this year.
It is noteworthy that the banking industry’s credit saw negative growth in the first two months of 2024. By January 31, the economy’s outstanding loans were nearly 13.479 quadrillion VND, down 0.6% from the beginning of the year. The figure fell to 13.472 quadrillion VND by February 29, down 0.72%. The trend reversed in the following month, with growth of 1.34% by March 31.
By the end of June, credit expanded 6% compared to the end of 2023 while total outstanding loans approximated 14.4 quadrillion VND (563.3 billion USD). This is a positive signal showing this year's credit growth target of 14 - 15% is reachable, experts said. Banks have rolled out various measures to save costs, stabilise interest rates and launch preferential loan packages to pump capital into the economy and fuel credit growth in the second half of 2024.
Deposit interest rates have tended to increase in recent months, by 0.4 - 1.6% per year depending on the terms. Experts point to mounting inflationary pressure and fierce competition from other investment channels such as gold and securities, which have prompted banks to raise deposit interest rates.
Assoc. Prof. Dr. Dinh Trong Thinh, an economic expert, said although deposit rates have inched up, lending rates need to be kept stable and at low levels to aid business recovery. Banks have been making efforts to keep lending rates low as directed by the Government and the State Bank of Vietnam (SBV).
Recently, the Lien Viet Post Joint Stock Commercial Bank (LPBank) launched a credit package worth 4 trillion VND to help businesses access a good financial source and maximize profit. Interest rates under this package stand at 6.5% and over per annum for medium-sized enterprises, and at 6.8% and over per annum for small and medium-sized businesses.
The Saigon - Hanoi Commercial Joint Stock Bank (SHB) is also offering a loan package to meet customers’ housing needs with an interest rate of 5.79% per year at the minimum.
Nguyen Thanh Tung, General Director of the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), said that it will continue to implement cost reduction measures and enhance technology application to its governance and operations.
Vietcombank and other state-run commercial banks will take the lead in considering more lending rate cuts despite the pressure from rising deposit rates, he noted.
Cutting lending rates has been one of the top priorities of the banking sector recently. The SBV has reported a significant interest rate reduction of 3.4% since the beginning of 2023. MBS Research, a research centre under the MB Securities Joint Stock Company (MBS), forecasts that credit growth will hit 14% in 2024, given an expected GDP growth rate of 6.3 - 6.5% for the year.
Drivers for the growth include the recovering consumer finance market, increased credit card usage, robust import-export activities, and high demand for auto loans. Low lending rates, signs of a reviving real estate market, along with a surge in inventory and land-related tax revenue will also stimulate loan demand in the near future, according to MBS Research.
Echoing the view, the Maybank Vietnam Securities Company (MSVN) held that credit growth since the year's beginning is reasonable, predicting that credit will accelerate in the third quarter thanks to the recovery in the real estate market.
Le Ngoc Lam, General Director of the Bank for Investment and Development of Vietnam (BIDV), blamed the economy's weak capital absorption on the fact that many businesses were dissolved and business health declined.
However, he expected that credit would grow strongly in year-end months when businesses get back on track.
Meanwhile, Pham Chi Quang, Director of the SBV's Monetary Policy Department, held that bringing down lending interest rates is a big challenge to the banking system.
To support credit growth, the SBV will continue working to keep interest rates stable and encourage credit institutions to decrease costs and publicize average lending interest rates. It has also issued a circular that allows credit institutions to extend the restructuring of debt repayment deadlines and maintain debt groups for certain sectors until the end of 2024, he added.
Does the banking industry’s credit reach the growth target of 15%?
SBV Deputy Governor Dao Minh Tu affirmed that the sector has rolled out various programmes and initiatives to prop up the economy. These include the 120-trillion-VND credit package for affordable housing, and the 30-trillion-VND programme for the forestry and fishery sector, helping encourage enterprises to develop in prioritised domains.
Credit growth has been on the upward trend, meaning the Government’s tax and fee cut policies and commercial bank concessional loans have shown efficacy, he said.
Various economic organisations expect demand for credit will increase in the second half of the year as interest rates remain low, contributing to bolstering the economic recovery.
Vietcombank Securities Company has forecast credit for the whole year to grow at 12-13%. The expansion will include robust production activities, export, as well as the acceleration of public investment, particularly in key infrastructure projects.
Meanwhile, MB Securities Joint Stock Company has predicted that credit growth will reach 14% this year, with high demand in consumer finance, credit card and car loans thanks to low interest rates and retail sales recovery.
Experts predict that credit growth will be positive in the second half of 2024 and higher than the first half, but there is a bumpy road ahead in achieving the credit growth target of 15% for the whole year./.
