Credit growth expected at year’s end

Credit growth expected at year’s end

The State Bank of Vietnam (SBV) forecasts significant credit growth in the final months of the year, bringing the annual rate to 8-10 percent. As of November 17, the banking sector’s credit growth reached 7.26 percent. The banks are expected to pour VND150-320 trillion into the economy in the fourth quarter of 2020.

Credit institutions are implementing solutions to meet production and trade needs

Credit growth

According to the SBV, as of November 17, 2020, the country’s outstanding loan balance reached more than VND8.79 quadrillion, 7.26 percent more than in the same period in 2019. The SSI Securities Company recently forecast that 2020 credit growth would reach 9-10 percent and the State Bank may raise credit ceilings for some banks in the near future.

Credit has supported a number of industries that are the driving force for economic growth. Credit for electricity production and distribution, gas, hot water, steam and air conditioning increased by 13.31 percent; credit for water supply, waste and wastewater management and treatment by 8.36 percent; for construction up 9.01 percent; and for wholesale and retail and repair of automobiles, motorbikes and other motor vehicles credit increased 8.08 percent.

Outstanding loans of trade and services accounts for a large proportion of 63 percent, with the highest growth of about 6.32 percent, while outstanding loans for the construction industry are estimated to have increased by 5.89 percent, accounting for 28.75 percent, and credit for the agro-forestry and fishery sector accounts for 8.66 percent, an estimated increase of 5.09 percent.

Credit continues to be concentrated on priority areas set by the government. Credit for export increased seven percent, while that for agriculture and rural development grew five percent, credit for small and medium-sized support industry enterprises and high-tech businesses rose 5.5 percent.

Financial expert Can Van Luc said the demand for credit would increase in the remaining months of the year, and the banks’ outstanding loan balance is expected to soar especially in the context of dropping deposit interest rates.

Credit growth would improve significantly in the remaining months of the year, buoyed by rising investment once the Covid-19 pandemic is brought under control, experts forecast. According to the SBV, credit growth in the last months of the year would boost the annual growth to 8-10 percent.

Growing credit demand

Nguyen Tuan Anh, Director General of the SBV’s Department of Credit for Economic Sectors, said that in helping businesses and people overcome difficulties and maintain stable lives in the context of the pandemic, the government issued a series of stimulation measures, while the banking sector has implemented credit solutions to help borrowers overcome difficulties. A number of credit institutions have seen signs of credit growth and the demand for capital has increased.

In the remaining months of 2020, Deputy Governor Dao Minh Tu affirmed that the SBV would continue to closely follow the plan to boost credit growth to support economic growth. To achieve that goal, the central bank has proposed a range of solutions, including businesses’ debt restructuring and interest payment delays, but the most important solution is to reduce interest rates.

Since early this year, the SBV has lowered interest rates three times. Specifically, it reduced interest rates subject to deposits with a duration of less than six months by 0.6-1.0 percent per year, and interest rates subject to short-term loans by 1.5 percent to 4.5 percent per year for borrowers in priority sectors, enabling businesses to access loans at reasonable costs in the context of the Covid-19 pandemic.

SBV data show that as of October 2020, credit institutions extended loan payment deadlines for more than 271,548 customers with total outstanding loans of VND321.407 trillion, provided interest rate exemption and reduction for 484,939 customers with total outstanding loans of more than VND1.177 quadrillion.

The credit growth forecasts are feasible, as according to banking expert Nguyen Tri Hieu, high demand for loans is expected at the end of the year, and commercial banks can take advantage of this business segment to push credit to consumers.

The SBV is directing credit institutions to assist their customers, give priority to meeting production and trade needs in order to promote economic growth and recovery after the epidemic is controlled, simplify capital borrowing procedures and ensure credit quality and safety and the banking sector’s healthy operations.

VietNam Economic News