Although banks have promoted many measures to support credit with preferential interest rates for customers facing difficulties due to the impact of Covid-19 and the State Bank of Vietnam (SBV) has reduced the operating interest rate several times, credit growth is still slow. With positive signals of the economy, will credit grow in the last three months of the year?

All banks have offered preferential credit packages to support people
and businesses affected by Covid-19.

An increase of more than 9% is feasible

In early 2020, before the Covid-19 pandemic, the State Bank set a credit growth target of 14%, adjusted in accordance with the actual situation. At that time, credit growth in 2019 was 13.5%, so the 14% target of the State Bank was considered low compared to the growth needs of the economy. However, the outbreak of Covid-19 pandemic changed many goals of economic development in general and the banking sector in particular.

Reporting on the credit growth in the first nine months of the year, the State Bank said that after the first quarter increased slowly, as it only increased by 0.01%in January, in February by 0.2%, in March by 1.3%, then into the second quarter, credit showed signs of gradual increase as it increased by 3.63% in June.

By the third quarter, credit continued to improve,increasing by 4.03% in July, andincreased by 4.75% in August and increasing 6.09% by Septembercompared to the end of 2019. However, if compared with 9.4% of the same period last year, it is still very low.

Although it was lower than the same period last year, this was also a great effort of the whole sector to stimulate money flow to the market. Along with the commercial banks themselves inreducing costs and restructuring operations to offer credit packages with preferential interest rates, in March, May and October, the State Bank has reduced the operating rate, with a total reduction of 1.5-2%.

Thanks to that, the credit growth slowed down but there was a gradual increase over the months. By the end of the year, there was a stronger increase at the beginning of the year. According to calculations, with an increase of 6.09% in nine months compared to the end of the year, it means that banks have "pumped" nearly VND500 trillion into the economy, bringing the total outstanding credit of the system to nearly VND8.7 quadrillion.

According to the Deputy Governor of the State Bank of Vietnam Dao Minh Tu, in the condition of well-controlled pandemic and the active support for production and export, credit growth of over 9% is feasible.

To achieve the 9-10% growth result as mentioned above, the State Bank committed to fully meet the capital needs of the economy, creating the most favorable liquidity for commercial banks to reduce lending rates to support customers; continuing to consider adjusting credit growth limits to create conditions for credit institutions to expand credit granting to people and businesses.

Caution with risks

A recent report by VnDirect Securities Company has lowered its credit growth forecast for 2020 from 11% to 9%. In the base scenario, the company forecasts credit growth of 13-14% in 2021 thanks to loosening monetary policy and accelerating disbursement of public investment. However, this is also a fair increase in the current context.

According to the latest survey of the State Bank of Vietnam, the demand for credit will improve significantly at the end of the year, thanks to some proactive measures of the Government to revive the economy. Statistics also show that the import-export, retail and textile sectors will be the main drivers of credit growth.

Therefore, in the past nine months, credit has continued to focus on priority areas under the direction of the Government, especially some areas that are now taking advantage of the new context such as export credit increased by 7%, credit for agriculture and rural areas increased by 5%, credit for small and medium enterprises increased by 5.5%.

But the reality in Vietnam shows that high credit growth does not mean it will have a positive impact on the economy. According to finance - banking specialist, PhD. Can Van Luc, credit still accounts for 135% of GDP, a relatively high level compared to the size of the economy as well as the level of economic development. Therefore, banks need to focus more on credit quality assurance, directing it to the practical needs of the economy.

Obviously, banks now struggle, when theyboth have to ensure credit growth to ensure profit and deal with the amount of bad debt that increases gradually.

According to the leader of a commercial bank, the growth of outstanding loans of more than 4% as of now is very good. If we try to increase the outstanding loans, even to lower the credit standard, it will be difficult to avoid risks and push banks into the situation of "stand when lending, kneel when collecting".

Moreover, Mr. Pham TheAnh, Head of Macroeconomics Department, National Economics University, said that Vietnam's policy of lowering interest rates does not help for credit growth, but helps to reduce pressure to pay off debt.