Banks are accelerating capital injections, and credit is expected to surge in the final months of the year.

Improved business and production, easing exchange rate pressure, and various policies supporting access to capital are factors driving credit growth in the final months of the year.

According to statistics from State Bank of Vietnam, as of September 30th credit growth While up 9% compared to the end of 2023, it is still quite far from the target of 15% for the whole year. However, economic experts believe that there are many factors supporting the acceleration of credit disbursement in the last quarter of 2024. In particular, the improvement in manufacturing and business sectors, the easing of exchange rate pressure, and policies supporting access to capital.

Governor of the State Bank of Vietnam, Nguyen Thi Hong, stated that the banking sector has actively promoted credit in recent times, and the target of 15% credit growth for the whole year is entirely feasible because credit typically increases sharply in the last months of the year.

In fact, commercial banks and some localities with large loans for investment in transportation infrastructure, airports, and seaports have driven rapid credit growth since the third quarter. Besides that, the main driver of credit growth in the first nine months of 2024 remains focused on strong sectors in the economy. For example, the forestry and fisheries credit package has continuously increased in size over the past year from VND 15,000 billion (July 2023), VND 30,000 billion (early 2024), and VND 60,000 billion (September 2024).

As of September 30th, credit growth reached 9% compared to the end of 2023. Photo: Mai Huong

Mr. Nguyen Duc Lenh, Deputy Director of the State Bank of Vietnam's Ho Chi Minh City branch, stated that although the forestry and fisheries sector accounts for a small proportion of the city's Gross Regional Domestic Product (GRDP), the disbursement results have met the capital needs of many businesses, households, and cooperatives operating in this sector, thereby creating a ripple effect on other business sectors.

According to Dr. Can Van Luc, a member of the National Financial and Monetary Policy Advisory Council, credit has recovered strongly in recent months thanks to the resurgence of investment and consumption activities, positive developments in the real estate market, and low lending interest rates. Dr. Luc believes that credit will continue to grow rapidly in the coming period due to economic growth reaching 7.4% in the third quarter of 2024, projected to reach approximately 6.7% for the whole year; and the positive developments in the real estate market boosting credit demand for investment, real estate business, and the purchase of housing, including social housing…

Dr. Nguyen Huu Huan, a lecturer at the Ho Chi Minh City University of Economics, observes that a positive point is that credit growth is keeping pace with the growth of the economy and production and business activities. Some sectors have seen outstanding credit growth, such as industrial credit increasing by 9.8% and high-tech credit increasing by 18.15% by the end of the second quarter of this year.

“From now until the end of the year, credit disbursement will see a breakthrough thanks to several factors: the USD/VND exchange rate is trending downwards, and the reversal of monetary policy by the US Federal Reserve (Fed) has eased pressure on the exchange rate, giving the State Bank of Vietnam more room to promote credit growth, domestic consumption, and investment to support economic growth; the seasonal factor of credit absorption at the end of the year; and the implementation of credit promotion solutions by the banking sector.” - Mr. Huan emphasized.

Banks are directing credit towards the production and business sectors. Photo: Agribank

Similarly, FiinRatings suggests that lower USD interest rates will support international borrowing costs. Businesses that do not implement exchange rate hedging will benefit as lower USD interest rates directly impact loan interest rates (SOFR floating rate + margin). Furthermore, lower exchange rates also facilitate upcoming international borrowing/bond offerings.

In addition, credit is on track to recover until the end of the year thanks to the corporate customer segment; however, according to FiinRatings, the quality of credit growth needs to be emphasized. Outstanding credit at the end of September 2024 increased by 8.53% compared to the beginning of the year, but this was mainly driven by the corporate customer segment amidst weak personal consumer demand.

“The State Bank of Vietnam’s ability to achieve its credit growth target by the end of the year will depend on the recovery of the real estate, energy, and export sectors… However, since credit growth is concentrated in the business sector, especially the real estate sector, the quality of credit growth also needs to be emphasized to avoid leading to even higher levels of non-performing loans, increasing risks for the banking system.” - noted the experts at FiinRatings.

Demonstrating its determination to accelerate credit growth, the State Bank of Vietnam has just issued document 8444/NHNN-VP implementing Directive No. 29/CT-TTg of the Prime Minister on stimulating consumer demand, supporting production and business, and developing the domestic market.

In this document, the State Bank of Vietnam leadership specifically directed credit institutions to research and develop credit products specifically for the consumer sector; to promote lending through electronic and online methods; to simplify loan and consumer loan procedures, creating favorable conditions for people and businesses to access loans in order to promote the consumption of domestically produced goods.

In addition, continue to closely monitor the situation and accelerate the implementation of credit programs to support social housing, workers' housing, and projects to renovate and rebuild old apartment buildings according to Resolution No. 33/NQ-CP; and credit programs for the forestry and fisheries sectors (with an estimated implementation scale of approximately 50,000 - 60,000 billion VND)...

With the promising start this year, coupled with the recovery in manufacturing as shown by the PMI (Purchasing Managers' Index) and IIP (Industrial Production Index), and the strong recovery in export sectors, it is hoped that credit will surge in the last three months of the year.

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