Credit Drops: Unusual Indicator

The socio-economic report presented by Mr Nguyen Van Giau at the NA meeting on 21 May points out that the national economy in the first four months achieved certain results, notably low CPI (much lower than that of the same period), stable foreign exchange rate on interbank market.

 

However, “difficulties and challenges are huge in consideration of economic recession signs and arising social security issues,” emphasised Chairman Nguyen Van Giau. GDP in QI rose by 4 percent, the lowest rate in recent two years and lower than the Government’s plan of 5-6 percent. GDP in QII is estimated to grow up by 4.5 percent. The investigation report, therefore, states “it is difficult to reach the growth target of 6-6.5 percent set for 2012.”

 

As evaluated by the Committee of Economy, liquidity of some banks has improved considerably, shown via less intensity of the interbank market in recent time. The State Bank of Vietnam (SBV) has put forth strong measures to improve liquidity. Through its foreign currency purchase channel, SBV has pumped into the market some VND130,000 billion. At the same time, VND30,000 billion has been injected through liquidity supporting channels and VND30,000 billion lent for purposed capital replenishment. Meanwhile, SBV’s total capital volume mobilized from the economy in QI only saw an increase of 1.56 percent.

 

However, as of 20 April 2012, the outstanding loans still witnessed negative growth. The inflation rate was low but lending interest rate still high, which strongly affects the two objectives: good influence on curbing inflation, but negative impact on production, business and the rational growth. As of March 2012, total outstanding loans of the banking system were estimated to go down by 2.13 percent against December 2011. Figures of the SBV show that credit growth of the whole system only goes down by over 1 percent. If virtual growth is eliminated, the decrease is just 0.4 percent. Nevertheless, this is still an unusual indicator when compared to previous years. As of 20 April 2012, total outstanding loans were estimated to fall by 1.35 percent.  

The report of the Committee of Economy also highlights that the risk of bad debt goes up and the reason for the shift of credit to safer investment and business channels in the last couple of months such as purchasing Government Bonds and treasury bills of the SBV instead of outstanding loan growth. VND30,000 billion of Government Bonds and VND45,000 billion of treasury bills of the SBV were successfully issued; bank deposits of credit institutions at the SBV reached VND60,000 billion (VND15,000 – 20,000 billion higher than the compulsory deposit rate).

 

A vast majority of members of the National Assembly think that macro-economic stabilisation of the economy is still encountering many challenges. Confidence maintenance and consolidation and timely provision of information and sound macro-policy signals in order to guide the market and create favourable conditions for the market to operate according to objective rules are important factors.

 

Almost all members in the NA Committee of Economy believe that maintaining growth at a reasonable level and tackling difficulties for production and business activities also contribute to macro-economic stabilisation and guaranteeing social welfare. As such, this agency proposes that socio-economic objectives set for 2012 by the National Assembly’s Resolution be achieved. Flexibility, however, is needed; obstacles must be tackled so as to develop production and business; more attention paid to domestic market and credit priority given to labour intensive, manufacturing and exporting areas.