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To finish the credit growth: full speed race

10:27 | 01/11/2017

VCN- According to the State Bank of Vietnam (SBV), in the first nine months of this year, the credit growth is positive with an increase of 12.16% compared to the end of 2016, which is quite high compared to some recent years. However, the credit growth target of 21-22% put by the Prime Minister has still too far, put pressure on the rest of the year.

to finish the credit growth full speed race
The credit growth target of all 2017 is too far. Photo: collected.

Many signals

According to the newest business trend survey of the credit institutions and the foreign bank branches conducted by the Department of Forecasting and Statistics, the State Bank of Vietnam (SBV) in September 2017, the credit institutions expected the outstanding credit of the economy would speed up in the last quarter of the year, average expected growth would be 6.07% in the fourth quarter (higher than the real growth of 5.91% in the fourth quarter of 2016, and expected growth of 5.09% in the previous quarter) and a 17.02% increase in 2017 (higher than the expected increase of 16.3% recorded in the previous survey, but still be lower than the actual increase of 18, 25% in 2016).

The foundation that the credit institutions expected the credit growth in the last months of the year is the enterprises and people would have more demand for loans in the peak season when the interest rates were stable, the credit institutions were trying to reform the procedures to increase the access ability to credit. So that, the SBV assessed that the credit of the economy continued to increase in the first months of 2017 and increase steadily over the months. The credit structure focused mainly on the production and business sector, in which, the credit for some key economic sectors and priority sectors was higher than the overall growth rate of the whole system. Typically, the agricultural and rural development credit increased by 17% compared to the end of 2016; the credit for high technology enterprises increased by 25.12%; the credit for small and medium enterprises reached 1.292.182 billion VND, up 7.49%...

The credit debt in the first nine months of 2017 with the good increase is a reason to improve the profit of the whole banking industry. With the growth of 12.16%, about 668.8 trillion dongs of credit is disbursed to the economy instead of the previous figure of 632.4 trillion dongs. Therefore, the report of business results in the first 3 quarters of 2017 of many commercial banks showed the "terrible" profit of trillions. So, the SBV continues to instruct the credit institutions to strengthen the capital supply to the economy but it still ensures the credit quality control.

Another factor to support high credit growth is the stable interest rates and discretion to down. Based on the conditions, movements of favorable macroeconomic and monetary market, from the beginning of July, 2017, the SBV adjusted to decrease the interest rates to share difficulties with the enterprises, promote the production and business development (decrease adjustment of 0.25% per year for the interest rates adjusted by the SBV, decrease adjustment of 0.5% per year for the maximum short time lending rates of the credit institutions to meet the capital demand serving some economic sectors and sectors according to regulations...). Thanks to this operation of the SBV, the experts said that the interest rates at the end of the year would be difficult to reduce, but would maintain the essential stability, help the enterprises increase the ability to borrow.

Road to be still far

Although the positive signals mentioned above will create motivation for the banks and the enterprises to promote credit, however, the credit growth target of 21-22% of the whole 2017 is still far to finish, while the banking system has just over two short months to complete.

According to Bao Viet Securities Joint Stock Company (BVSC), the SBV was likely to maintain the orientation of loosening its monetary policy in the fourth quarter to ensure the growth target. In addition, the BVSC believed that the credit growth of the past nine months was still a relatively small figure compared with the expectation and target of the whole year. Thus, in order to achieve the growth target of 21%, in the last months of the year, the BVSC said that the credit growth rate was 10% (an average of 3.3% per month), equivalent to about 552 trillion dongs flowing into the economy. In order to have such a large amount of capital, the SBV would have to calculate a reasonable money supply which the banking system would not face liquidity problems, even have to ensure the system liquidity be plentiful to create condition for the banks strive to reduce the interest rate by 0.5% as directed by the Prime Minister.

In addition, along with macroeconomic management and reasonable monetary policy, according to the finance and banking expert Nguyen Tri Hieu, 80% capital of the economy was based on the bank loans and 80% of the banking vitality was based mainly on the loans. Therefore, the banks and the enterprises had the symbiotic relationship that was the interests of two parties, both the enterprises and the banks. Therefore, Mr. Hieu said that further clever settlement of this relationship would create motivation for the credit growth.

Can be seen, to achieve the above goals, the banking system will have to run at full speed, find out the reasonable measures. But according to the experts, it was not necessary to follow the credit growth at all costs, because it could lead to negative consequences. Not long ago, the experts of HSBC warned that the rapid credit growth could bring new risks to the banking sector, especially when new credit was allocated to the inefficient industries. In addition, the recent studies of the IMF and the World Bank noted that the State enterprises had been absorbed an unequal credit compared to the small and medium enterprises. Hence, HSBC said that high credit growth was not enough to boost Vietnam's economic growth, but it needed synchronized solutions to achieve the balanced growth.

By Huong Diu/ Binh Minh