Credit growth likely to remain stagnant

Credit growth likely to remain stagnant

Commercial banks will be hard-pressed to meet the 8-per-cent credit growth target in the second half of the year despite looser Government monetary policies, said National Advisory Council for Financial and Monetary Policy member Traan Du Lich.

Business demand for capital often increased significantly in the final months of the year, but the rise was not expected to be as dramatic this year in light of large inventories, depressed consumer demand, and shrinking export markets, Loch said.

Exports in the first eight months of the year surged by 17 per cent year-on-year, but the rise was mainly attributable to foreign-invested enterprises, according to the General Statistics Office. While retail sales revenue during the period increased 17.5 per cent, the inventory index remained high at 20.8 per cent.

Many enterprises, already saddled with heavy debt burdens, would only be able to take out new loans if the Government forces commercial banks to refinance existing debts at lower interest rates.

The banking system has so far seen stagnant credit growth, despite adequate liquidity. The central bank had pumped VND180 trillion (US$8.57 billion) into the system via various channels by the end of July, but systemwide credit growth in the first eight months has increased by just 1.4 per cent since the end of last year, Lich said.

High inflation has also kept interest rates high, he noted. With the consumer price index is targeted at 8 per cent this year, deposit interest rates are unlikely to fall below 9 per cent per year.

But banks have offered attractive lending interest rates to lure borrowers, LienViet Bank vice chairman Nguyen Duc Huong told the newspaper Dau Tu (Investment). Pham Chi Thanh, head of Vietcombank's business and capital management department, said that his bank would offer six-month loans at interest rate of 6 per cent to qualified borrowers

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