According to experts, the sudden increase in credit at the end of last year may not have entered real economic activities.
Money supply increased dramatically at the end of the year
Money supply (M2) or total means of payment includes the amount of cash in circulation, deposits of residents and businesses at credit institutions; including term deposits, non-term deposits, savings deposits, etc.
In mid-2023, the money supply increased by only 3% compared to the end of 2022. Near the end of the year, the situation was completely different.
According to the General Statistics Office, as of December 21, 2023, total means of payment increased by 10.03% compared to the end of 2022. At the end of 2023, according to data from the State Bank, credit growth was 13.7%, and deposits also increased by 14%.
Mr. Le Hoai An, CFA-Founder IFSS, banking training and consulting expert, Financial Solutions Joint Stock Company, calculated that money supply could increase from 5.5% in 2022 to about 13 - 14% by the end of 2023.
| 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|
| January | 1.74 | 0.76 | 2.59 | 0.79 |
| February | 0.94 | 0.97 | 1.81 | 0.32 |
| March | 1.72 | 1.97 | 3.45 | 1.32 |
| April | 1.95 | 2.93 | 3.50 | 1.71 |
| May | 3.36 | 3.70 | 3.33 | 2.05 |
| June | 5.15 | 4.43 | 3.78 | 3.71 |
| July | 5.58 | 4.80 | 3.18 | 2.91 |
| August | 7.02 | 5.34 | 2.68 | 4.04 |
| September | 8.63 | 6.35 | 3.21 | 5.62 |
| October | 9.29 | 6.58 | 3.08 | 5.96 |
| November | 10.94 | 7.68 | 3.55 | N/V |
| December* | 14.53 | 10.66 | 6.15 | 14 |
Data: SBV, GSO, WiGroup, * expert estimate
Normally, when credit increases, deposits increase, and total means of payment will increase accordingly.
| Credit growth | Deposit | |
|---|---|---|
| January | 0.1 | -0.6 |
| February | 0.9 | -0.2 |
| March | 2.6 | 1.1 |
| April | 3.0 | 1.4 |
| May | 3.3 | 2.3 |
| June | 4.7 | 4.6 |
| July | 4.5 | 4.1 |
| August | 5.6 | 5.3 |
| September | 7.0 | 7.3 |
| October | 7.4 | 7.5 |
| November | 9.21 | N/A |
| December | 13.7 | 14 |
Data: SBV, WiGroup
Mr. An noted that money supply growth in 2023 only skyrocketed in the fourth quarter, especially near the end of the year. Also, in the last quarter of the year, deposits increased by more than VND800,000 billion, almost equal to the first 9 months of the year combined, despite record low interest rates.
The sudden increase in credit growth and deposits at the end of the year has boosted the money supply dramatically. However, there are still many concerns when looking at the money supply growth with the GDP growth rate.
| Data: WiGroup | |
|---|---|
| T12-2019 | 8.8 |
| T12-2020 | 10 |
| T12-2021 | 10.9 |
| T12-2022 | 11.8 |
| T12-2023 | 13.5 |
Accordingly, money supply by mid-December 2023 will be around 10%, consistent with an economic growth rate of more than 5% and inflation of over 3% for the whole year of 2023.
"By the end of 2023, money supply growth will skyrocket. Looking at GDP growth and inflation, the sudden increase in money supply in the last days of the year has not really been reflected in the price index, and a large amount of money may not have entered the real economy," Mr. An analyzed.
Looking at the money turnover rate (GDP/money supply), it can be seen that this index in Vietnam is very low. While in the US it is about 1.6 to 2 rounds/year, in Vietnam it is about 0.6.
"It could be that the amount of money lent to the economy quickly circulates back into the banking system or that a portion of the money supply is not used effectively and is accumulating in society," Mr. An questioned, saying that if we try to pump money in, it will be difficult to create economic activity immediately.
When will credit quality be clearer?
According to Mr. An, the most worrying thing this year will not be inflation but whether credit flows into real economic activities in the context of weak economic demand.
Associate Professor Dr. Nguyen Huu Huan - Head of the Financial Market Department, Ho Chi Minh City University of Economics - said that the quality of credit injected very strongly at the end of last year will be verified in the first quarter of 2024.
"Will the money pumped out flow into the real economy or run back into the banking system through savings or speculation?", Mr. Huan said.
According to Mr. Huan, if the sudden increase in credit is mainly due to "running" KPIs, customers do not have a need to borrow capital, it will be very difficult to have a "bounce" in economic growth rate.
Not to mention, if money supply is pumped into the economy without creating value, it will cause inflationary pressure.
HA (According to Tuoi Tre)Source
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