Developing capital markets to reduce dependence on bank credit

Discussing in the hall about the additional assessment of the results of the implementation of the socio-economic development plan and the state budget in 2023; the implementation of the socio-economic development plan and the state budget in the first months of 2024, National Assembly delegate Nguyen Viet Ha, Director of Agribank Tuyen Quang said that bank interest rates have continuously decreased and remained low, banks are currently continuing the race to reduce lending interest rates and improve service quality to attract customers in order to increase credit growth. However, the reality is that businesses, due to difficulties, especially in the output market, have reduced production scale, leading to no demand for loans. This is a key reason why credit growth is difficult and also reflects the low capital absorption rate of the economy...

Delegate Nguyen Viet Ha ( Tuyen Quang Delegation))

“Through the Government's report and the Economic Committee's review report on the additional assessment of the implementation results of the 2023 Socio- Economic Development Plan; the implementation of the 2024 Socio- Economic Development Plan shows that in addition to the achieved results such as stable macro -economy , controlled inflation, and growth reaching 5.66%, the 2024 Socio -Economic Development Plan is also facing many difficulties and challenges,” said delegate Nguyen Viet Ha.

Regarding the number of businesses withdrawing and re-entering the market, the delegate emphasized that this is the first time in the past 5 years that the number of businesses entering and re-entering the market in the first 4 months of the year has been lower than the number of businesses withdrawing from the market.

The consequences of the Covid-19 pandemic, along with the negative impact of political and military conflicts in countries around the world, have caused supply and demand from production to consumption of businesses to be disrupted, leading to many difficulties in business operations.

Paying special attention to the difficulties in the output market of enterprises, delegates said that enterprises lack orders from the international market. This is a prominent difficulty in the business activities of enterprises since the Covid-19 pandemic. Although this situation is gradually improving, it is still a major difficulty for enterprises.

For example, according to a survey by the General Statistics Office, among the main factors affecting production and business of processing and manufacturing enterprises in the first quarter of 2024, low domestic market demand accounted for 55.1%, and low international market demand accounted for 34.2%. The lack of orders that has lasted from 2023 to now has forced many enterprises to reduce production, cut labor, and even dissolve because they are no longer able to withstand the situation.

Second, domestic consumer demand increased at a low level. In the first 4 months of 2024, the total retail sales of goods and consumer service revenue at current prices is estimated to increase by 8.5% (in the same period in 2023, it increased by 13.3%), if excluding the price factor, it increased by 5.3% (in the same period in 2023, it increased by 8.7%), lower than the expectation of reaching the same growth rate before the Covid-19 pandemic (the average of 2015 - 2019 increased by 8% over the same period). In particular, the main component of consumer demand is retail sales of goods (accounting for 77.3%) which increased only moderately by 7.1% over the same period, showing that domestic consumer demand is still weak.

In addition, Vietnam's purchasing managers' index (PMI) in 2023 recorded a level below 50 points (a decline in production and business conditions) in 9/12 months, reflecting the difficulties of the economy.

In recent times, in order to create conditions for businesses to recover production and support consumer demand stimulation, bank interest rates have continuously decreased and remained low. Banks continue to compete to reduce lending rates and improve service quality to attract customers in order to increase credit growth. Incentive programs are also focused on production and consumption activities of businesses and people. However, due to difficulties in the output market, businesses have reduced production scale and even stopped investing. People are cautious and save on spending, leading to no need to borrow capital. This is a key reason why credit growth is difficult, reflecting the low capital absorption rate of the economy.

To contribute to solving the above difficulties of enterprises, delegates recommended that the Government pay attention and focus on creating diverse and sustainable export markets for enterprises, while diversifying and improving the quality of export products, and effectively exploiting signed free trade agreements.

In addition, it is necessary to implement policies to maximize the internal strength of the domestic market, including strengthening the role of fiscal policies, such as policies that have been effectively implemented in the past, including: exemption, reduction, extension of taxes, fees, land use fees, etc. Implement domestic market trade promotion programs, promote the distribution of goods through digital platforms and e-commerce to expand domestic consumption; promote the movement of Vietnamese people giving priority to using Vietnamese goods.

Along with that, it is necessary to continue to improve the legal system and reform administrative procedures towards creating an open, healthy and favorable business environment for enterprises.

Removing difficulties in the stock market and bond market to expand capital supply channels for businesses, gradually limiting the economy's capital sources that depend mainly on bank credit channels, because this will pose potential risks to the economy in general and the operation of the banking system in particular.

Source: https://thoibaonganhang.vn/phat-trien-thi-truong-von-de-han-che-su-phu-thuoc-vao-tin-dung-ngan-hang-152150.html