Monetary Policies Loosened to Support Economic Recovery

The resolution signed by the Prime Minister requested the State Bank of Vietnam (SBV) to closely monitor market developments, apply flexible monetary policy, implement measures to promote quality credit growth, reasonably restructure credits; accelerate the restructuring of weak credit institutions, and resolve bad debts.

 

The data of the SBV showed that by August 25, credit economy increased by 9.54 percent compared to the end of 2014. This number is twice that of 2014 rate of 4.3 percent. Five priority sectors of the government have steady credit growth. Loan for agriculture and rural development by the end of August 2015 was estimated at VND811,638 billion, up 9 percent compared to that of December 31, 2014. Loan for exports reached total VND184,596 billion, up 4.99 percent; loan for high tech fields reached VND25,614 billion, up 29.12 percent; supporting industry VND110,620 billion, up 3.2 percent and small and medium-sized enterprises VND976,729 billion, an increase of 4.07 percent compared to the end of 2014.

 

SBV raised its credit growth target from 13-15 percent earlier this year to 15-17 percent. Many experts predict that with the current growth momentum, the annual credit will certainly exceed 17 percent.

 

As usual, Q4 is the time credit increases the fastest in years due to increasing business demand for loans for payments and production in Tet season. This year is no exception, with the direction of the Government, commercial banks would certainly widen the purse to the customers to make a profit.

 

However, the bad debt ratio is being tightened by the central bank. But as bad debt is reduced, economic growth is stronger and the real estate market has recovered, credit flow will unleash more.

 

Low inflation allows the central bank to maintain adaptable monetary policy. This year, SBV has kept recapitalization interest rates at 6.5 percent and discount rate 4.5 percent. The average lending rate of commercial banks was 9.5 percent in the first 6 months of 2015. Lending rates fell along with the confidence of consumers and investors has made recovering loan growth rise sharply.

 

Since the beginning of the year, credit growth has been relatively steady, averaging 1.1 to 1.2 percent / month. After 9 months, credit growth rate was nearly 11 percent, not waiting for massive disbursements in the end of the year to reach the target as before. This is a good signal of the credit flow. When they do not have to “race for growth targets” in last period of the year, banks will control the bad debt incurred, or strained liquidity, borrowing on the interbank market, pushing interest rates up high.

 

Steady credit growth also showed the economy has recovered for a more certain way. Regulated capital is poured into manufacturing, although the monetary market during the year has faced fluctuations in exchange rate. Market confidence remained stable through capital mobilization and lending without volatility, remained steady growth.

 

The priority areas of agriculture, rural areas are growing very strongly. The export sectors using high-tech applications and supporting industries are growing quite well. Accordingly, the objective of banking sector growth of 15-17 percent can be achieved as soon as the SBV constantly gives credit to the stimulus package. The priority areas of agriculture, rural areas are growing very strongly. The export sector, high-tech applications, supporting industries are growing quite well. Accordingly, the objective of the banking sector growth, revised up to 15-17 percent, can be achieved when the bank soon continuously issue credit package to stimulus.

 

SBV has approved the relaxation of credit "room" to high level, some banks have been approve up to 30 percent, even 36 percent, roughly equal to the time of hot development before. Since the beginning of Q4, lending activity of credit institutions began to accelerate. Some banks offer attractive incentive programs to develop new customers. HDBank lends VND4 trillion to corporate customers. VPBank gives priorities to small and medium-sized enterprises (SME) with loans up to VND2 trillion, with an attractive interest rate. ABBank also lends VND1 trillion to customers borrowing medium and long term loans with interest rates from 7.5percent / year.

 

Le Minh