Nguyễn Văn Nên, Secretary of the HCM City Party Committee, talks to officials from business groups at a conference held on February 17 to discuss solutions to promote the city's economic growth. VNA/VNS Photo Thanh Vũ

HCM CITY — Lending interest rates have surpassed the 10 per cent mark, piling pressure on many businesses in dire need of funding, a conference has heard.

Most rates were now above 10 per cent, Nguyễn Ngọc Hòa, president of the HCM City Union of Business Associations, told the conference held on February 17 to discuss solutions to promote the city's economic growth.

“High borrowing costs are a big challenge for businesses.”

Many find it very difficult to get loans, with banks claiming they have run out of credit quotas and demanding collateral that businesses often lack, according to Hòa.

The 2 per cent interest rate subsidy the Government is offering for enterprises, co-operatives and business households is not easy to get due to tortuous paperwork and inspections.

To meet the demand for funding and support financially constrained businesses, it is vital to cut interest rates and enlarge credit quotas.

"The Government needs to keep value-added tax rate at 8 per cent for all sectors until the end of this year," he recommended.

Lý Kim Chi, president of the HCM City Food and Foodstuff Association, said businesses in the food processing industry had seen steady growth and operated at peak capacity since the beginning of this year.

Some companies had export orders that could take several months to fulfil.

Amid the current two-digit interest rates, rising costs of raw materials, water and electricity, companies had been struggling to stabilise production and had little hope of making profits.

“Businesses need support in terms of interest rates to overcome challenges and expand their business, she added.

Đỗ Phước Tống, president of the HCM City Mechanical - Electrical Enterprises Association, said there were policies to extend credit to the industry at low interest rates, but it was extremely difficult and took much time to actually get a loan.

Some business owners had to sell their houses to repay loans and avoid defaults, he added.

Increasing signs of economic slowdown

A survey of enterprises by the city Union of Business Associations found that business activities had slowed down since the fourth quarter of last year.

Only a fifth of respondents reported an increase in revenues in the fourth quarter compared to a fourth the previous quarter.

The number of businesses paying average monthly salaries of more than VNĐ10 million (US$420) fell to 65 per cent from 80 per cent in the second quarter of 2022.

Some required their employees to work in shifts or go on furlough due to lack of orders.

In two of the main export markets for Việt Nam’s textiles and garments, the EU and the US, demand declined by 60 per cent and 30-40 per cent, according to the HCM City Association of Garment, Textile, Embroidery and Knitting.

Businesses’ inventories have risen by 20-25 per cent amid limit ed or no orders since the fourth quarter of last year.

Nguyễn Văn Nên, Secretary of the city Party Committee, said administrative reform, digital transformation and investment promotion would be speeded up to boost the economy.

The city planned to restore its investment stimulus programme to help businesses access funding for production and expansion amid the economic uncertainty.

He called on the business community to strive to overcome challenges and inform the city People’s Committee if there are inappropriate policies that hinder economic growth.