Source: Socialist Republic of Vietnam
Vietnam’s GDP growth in the first nine months this year reached 2.12%, thanks to the active support from credit growth. With the current good control of COVID-19, the State Bank of Vietnam (SBV) has predicted that credit growth in the last months of the year would likely to increase significantly, resulting in an increase of from 8-10% for the whole year.
According to an updated report from the SBV’s Department of Credit for Economic Sectors, regarding credit growth to the whole economy, after the first quarter increased slowly (at 0.01% in January, 0.2% in February, and 1.3% in March), the credit showed signs of fast increasing in the second quarter (April: 1.42%; May: 1.96%; June: 3.63%). By the third quarter, credit flourished with an increase of 4.03% in July, 4.75% in August, and 6.09% in September compared to the end of 2019 (the same period in 2019 saw an increase of 9.4%).
Regarding credit growth to economic sectors, outstanding loans of trade and services account for a large proportion at 63%, with the highest growth of about 6.32%; while outstanding loans of construction industry are estimated to have increased by 5.89%, accounting for 28.75%; while credit for the agro-forestry and fishery sector accounts for 8.66%, an estimated increase of 5.09%.
In particular, credit has supported a number of industries that are the driving force for economic growth, with credit for electricity production and distribution, gas, hot water, steam and air conditioning increasing by 13.31%; water supply, waste and wastewater management and treatment up by 8.36%; construction up 9.01%; and wholesale and retail and repair of automobiles, motorbikes, motorbikes and other motor vehicles up 8.08%.
Regarding credit for priority sectors, capital continues to pour on priority areas under the direction of the Government. Notably, some sectors are now taking advantage of the new context such as credit for exports, up about 7%; credit for agriculture – rural area development, up 5%; and credit for small- and medium-sized enterprises, up 5.5%.
In the context of economic difficulties, credit growth in the first nine months of 2020 has positively contributed to support the country’s nine-month GDP growth of 2.12%, as well as sectors that are the driving force for economic growth, including electricity production and distribution, gas, hot water, steam and air conditioning supply, up 3.7%; processing and manufacturing, up 4.6%; construction, up 5.02 %; and wholesale and retail, up 4.98%. This result shows that the credit management of the central bank is on the right track, with proposed solutions have been issued timely and are suitable with reality, while gradually promoting their efficiency.
With the current well control of COVID-19, the implementation of the Government’s solutions to remove difficulties to promote economic recovery, along with monetary and credit solutions from the banking sector, credit at the end of the year is expected to continue to enjoy good growth, contributing to boosting capital supply for the economy and production and business operations.
The SBV has committed to implement synchronously such solutions as creating the most favourable liquidity for commercial banks to reduce lending interest rates to support their customers, continuing to adjust the credit growth limit to facilitate credit institutions to extend credit supply to people and businesses, while still ensuring the sector’s safety and efficiency, especially in ensuring effective investment in projects, thus contributing to economic growth.
At a recent Government press conference in September, SBV Deputy Governor Dao Minh Tu said that credit growth for the whole year may reach 8-10%, in which over 9% is feasible. Credit movements in September showed a positive sign in the issue of enterprises’ access to capital, thereby showing a positive development of the economy.
Specifically, by the end of August, credit growth only reached about 4.2-4.3%, but by the end of September, it reached about 6.1%. In the context of the economy heavily affected by the COVID-19 epidemic, credit growth in the first quarter was very slow and grew slightly faster in the second quarter, but still in a very difficult situation due to the negative impact of the epidemic on various sectors and fields. For that reason, the results achieved in the last quarter are encouraging.
In particular, some sectors, such as agriculture – rural area development and manufacturing, even areas that are still in difficulty such as services, telecommunications and transportation have all recorded positive increase in credit growth at a higher level than the general growth rate at about 7%. This shows that, in the context of the economy facing many difficulties due to the impact of the pandemic, businesses are changing positively and flexibly. Therefore, in the event of difficult conditions due to old debts, enterprises are still ready to access new loans on the basis of delaying and restructuring old debts.
In the remaining months of 2020, Deputy Governor Dao Minh Tu affirmed that the SBV would continue to closely follow the plan to boost the credit growth to positively support economic growth. To achieve that goal, the central bank has proposed a range of solutions, in which it has been actively handling difficulties for businesses through restructuring debts and interest due, but the most important solution is to reduce interest rates.
Specifically, the SBV has reduced the operating rate three times since the beginning of the year, with the 3rd adjustment in particular (applied from October 1) having had an immediate effect. The resonance reduction rate after three times of changing is about 1.5-2%, which would create a source of cheap capital for commercial banks to facilitate businesses and people wishing to borrow capital with lower interest rates.
Besides, commercial banks themselves have also reduced costs and lowered conditions to support businesses in borrowing loans at lower interest rates. In fact, the support through the lowering of interest rates, applied on both new and old loans, has created favourable conditions for businesses to access capital more easily.