Credit growth expected to rise 16.33% in 2017

The State Bank of Vietnam released the information this week after conducting a survey on business performance trends of credit institutions in the second half of this year.

The survey also shows that credit institutions forecast the total capital mobilisation of the banking system to rise 16.02% in 2017, of which dong contributes to a rise of 16.59% and foreign currency 1.14%.

The General Statistics Office (GSO) has reported that credit growth in the first half of this year was 7.54%, the highest in the past six years.

The new record, considerably higher than the previous record of 6.28% set in 2015, reflects the market’s significantly improved capacity to absorb capital, the GSO said.

Loans in the period were mainly focused on prioritised and large projects as instructed by the Government, accounting for roughly 50% of total outstanding loans.

Agriculture and rural industries, and small- and medium-sized firms received around 19% and 22% of the total outstanding loans, respectively.

Lending interest rates were 6-9% per year for short-term loans, and 9-11% per year for medium- and long-term loans. For customers with transparent finances, short-term lending rates ranged from 4-5% per year.

The banking system’s capital mobilisation in H1 has risen by 5.89%, and deposit interest rates have been relatively stable.

Interest rates for dong deposits were 4.5-5.4% per year for short term, 5.4-6.5% per year for medium term, and 6.4-7.2% per year for long-term deposits.

The Government has targeted credit growth of 18% for 2017, but at the National Assembly meeting recently, some deputies suggested that this limit be raised so as to support economic growth.

Analysts at Bao Viet Securities (BVS) also recently forecast that the central bank may consider raising credit growth targets for several banks to aid economic growth.

The Government has been under intense pressure to loosen its monetary policy as the country is determined to meet its GDP growth target of 6.7% for 2017. However, the fiscal policy has been struggling with disbursement of public investment, the BVS analysts said in a report.

By end of May, disbursement of public investments had touched VND88 trillion, equal to only 30.6% of the entire year’s estimates.

The BVS analysts said when fiscal policy does not support growth well, pressure will intensify on monetary policy. Increasing credit growth targets of several banks may be an option worth considering, the analysts said.