Accelerate the injection of capital into the economy.

SGGP 20/07/2023 12:35

Lending interest rates have now returned to pre-Covid-19 levels, but credit growth in the first nearly seven months of the year was only 4.03%, reaching only one-third of the year's target of 14%-15%. To achieve the set target, the banking system will have to inject more than 1.1 trillion VND net into the economy from now until the end of the year.

Weak capital absorption

Observations at commercial banks in July 2023 showed that lending interest rates had decreased by 0.5%-2% compared to the beginning of the year, but expanding credit in the banking system remained very difficult.

According to Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu, the reason is that the economic situation and businesses are facing many difficulties, lacking orders, and experiencing a decline in exports, leading to a decrease in investment and consumption demand, resulting in low credit demand.

“Banks are eager to increase lending because it is extremely difficult to raise capital without being able to lend it out. Commercial banks still have a lot of lending limits, however, in the current context, many businesses not only do not borrow more capital but also repay previous loans. The government and the State Bank of Vietnam are resolutely seeking all solutions to remove difficulties for businesses and promote credit in the coming period,” Mr. Dao Minh Tu informed.

Similar to the nationwide credit situation, credit growth in Ho Chi Minh City in the first six months of 2023 was only 3.5% compared to the end of 2022, about one-third of the growth rate in the same period of the previous year.

SHB offers a series of preferential interest rate packages to encourage businesses to confidently borrow capital for their operations. Photo: MINH HUY

According to Mr. Nguyen Duc Lenh, Deputy Director of the State Bank of Vietnam's Ho Chi Minh City branch, this growth rate is consistent with the economic growth situation of Ho Chi Minh City and the difficulties in absorbing capital by businesses, cooperatives, and household businesses in the area. In particular, difficulties from the export market, trade, services, tourism, and the real estate market have a direct impact on credit growth.

Due to low credit growth and excess capital, commercial banks have simultaneously introduced many preferential interest rate packages for both business and consumer loans to stimulate credit demand.

Specifically, SHB is allocating VND 6,000 billion in preferential loans to corporate customers to supplement short-term working capital with interest rates starting from 8.97%/year, and VND 1,000 billion for corporate customers borrowing to buy cars with interest rates from 9%-10.8%/year; MSB is boosting credit packages for business loans at 10.5%/year and real estate loans at 10.99%/year; BIDV is lending VND 20,000 billion for commercial housing purchases, with interest rates from 8.5%/year for developers and from 7.8%/year for homebuyers; Agribank has also recently reduced interest rates on new loans for production and business with short-term rates at 5%/year and medium- and long-term rates from 8%/year…

Expand lending limits, accelerate loan disbursement.

Against the backdrop of lower-than-expected economic growth in the first six months of the year and difficulties in securing funding for the economy, the State Bank of Vietnam recently made a significant adjustment: the credit growth (room) for credit institutions in 2023 is set at approximately 14% for the entire system.

Accordingly, it is estimated that from now until the end of the year, the banking system will have to inject a net amount of more than 1.1 trillion VND into the economy, which is double the credit level in the first six months of the year. Although the official credit limits for each bank have not been announced, it is known that Vietinbank, BIDV, and Vietcombank have had their limits increased to 14%; even two other private commercial banks have had their limits increased to 23%-24%.

Following a series of macroeconomic measures regarding finance and banking, economic experts believe that the State Bank of Vietnam's allocation of the entire credit limit by mid-year, instead of dividing it into multiple phases as in previous years, could help banks accelerate lending to achieve their assigned growth targets. However, the crucial issue is improving the economy's capacity to absorb capital so that the reduction in lending interest rates can be effective.

Dr. Nguyen Duc Do, Deputy Director of the Institute of Economics and Finance - Academy of Finance, assessed that the policy of reducing interest rates only has a certain impact on stimulating demand, but it is not enough to encourage businesses to borrow capital for expansion. This is because the global economy is slowing down, exports are declining, so the demand for loans is not high; it is necessary to continue focusing on exploiting domestic demand to promote economic growth, which is the key direction to prioritize.

Dr. Can Van Luc, chief economist at BIDV, also believes that accelerating the disbursement of public investment will play a positive role in spreading to other production and business activities, stimulating domestic consumption... In addition, the Government needs to support businesses negatively impacted by the decline in exports, investment, and consumption by better utilizing signed free trade agreements, promoting trade, and connecting supply and demand; while also decisively removing major obstacles and barriers currently facing businesses in accessing capital, legal issues, and export markets...

The government has just directed the State Bank of Vietnam to continue implementing comprehensive and decisive measures to reduce interest rates, especially lending rates, striving to reduce them by at least 1.5%-2%, applicable to both new loans and existing loans.

Source: https://www.sggp.org.vn/tang-toc-bom-von-cho-nen-kinh-te-post698144.html