Credit growth sees spike for Vietnam's economy

Source: http://business.asiaone.com/

 

Credit activities have developed strongly in the first months of the new year, a positive sign for the economy's recovery, independent market observers have said.

 

The economy's credit growth as of February 24 rose by 0.96 per cent compared with the figure recorded late last year, according a source from the Ministry of Planning and Investment.

 

Meanwhile, another source said the credit grew by 1 per cent by February.

 

Analysts said these were surprising changes because the country showed negative credit growth in the first few months of previous years. For instance, credit growth decreased by 1.67 per cent in February last year.

 

Senior economic expert Dr. Vo Tri Thanh explained that many enterprises had been expecting economic recovery.

 

A leader of the Viet Nam International Bank (VIB) told Dau Tu newspaper that many sources had predicted that economic performance would improve this year, so the bank expected good credit growth.

 

Both lending and deposit rates are at stable and low levels, which has also helped credit growth.

 

Meanwhile, the State Bank of Viet Nam's governor has asked the banking sector to seek ways to further cut the interest rate on long and medium-term loans by 1 or 1.5 per cent.

 

The central bank's new policy of allowing lenders to use up to 60 per cent of short-term deposits for long- and medium-term loans has also contributed to credit growth.

 

Decreased oil prices, low interest rates and economic recovery are other reasons behind the current growth.

 

Although the growth is a good sign, analysts warned lenders of the risks of rapid credit growth.

 

One of the banks' biggest risks is bad debt. Some banks may try to increase credit growth to hide their bad debts, analysts have said.

 

A source from Dau Tu said that PTBank, for example, increased its credit growth to reduce its bad-debt ratio.

 

In 2014, the bank's credit increased by 50 per cent while its bad-debt ratio fell to only one per cent.

 

Nam A Bank and VPBank also face a similar situation as their credit growth reached 32 and 35 per cent, respectively, in last year's third quarter.

 

Because of this, analysts said credit should not be extended too quickly, and that lenders should focus their resources on developing their services.

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