Negative credit growth
According to the State Bank of Vietnam, Nghe An branch: entering 2024, Vietnam's economy faces many difficulties and challenges. The economic recovery in the first months of the year is still slow. In addition, the first two months of the year fall within the Lunar New Year holiday season, customer sentiment and economic activities are not yet vibrant... leading to weak capital absorption of the economy, and negative credit growth nationwide in January 2024.
As of January 31, 2024, credit for the whole economy decreased by 0.6% compared to 2023, credit in Nghe An reached 296,505 billion VND, up 0.2% compared to the beginning of the year, the same period in 2021, 2022, 2023 was -0.7%; 2.1%; -0.4% respectively.
In the analysis report of Dragon Capital Securities Company (VDSC), citing the report of the State Bank, in the first two months of 2024, credit growth of the entire economy was negative. Specifically, by the end of January it was -0.6% and by February 16 it was -1.0%. Some large banks but credit growth decreased more sharply such as Vietcombank -2.3% compared to the end of 2023, BIDV -1.3% or Military Commercial Joint Stock Bank MB -0.7%.
The reason for the above situation in the money market is due to the economy's ability to absorb capital, in which the borrowing needs of businesses and people in the first months of the year are very limited. Up to this point, although the lending interest rate has dropped sharply to the lowest level of 5.0 - 5.3%/year, businesses are still not eager to borrow capital to implement production and business projects.
Mr. Tran Anh Son - Chairman of the Association of Outstanding Enterprises of Nghe An province shared: Due to the impact of the global economic recession, export orders have been cut. From textiles to cement, stone tiles, fine art wood... produced by local businesses cannot be consumed. In recent years, it has been felt that all manufacturing and trading businesses are facing difficulties, which has discouraged businessmen. Therefore, currently, although lending interest rates have decreased sharply, many businesses do not want to borrow capital because they have not done anything. Mr. Son also said that in the current context, even if interest rates decrease further, not many businesses will borrow capital.
Meanwhile, speaking with us, a representative of a large construction materials manufacturing enterprise in the area also said: Unlike before, the factory capacity was small, even though there were times when sales were slow, production could still be maintained because there was still warehouse space to store. Now, the capacity is large, so production can only be produced for a short period of time before the warehouse is full. Among the solutions, the company is forced to stop production, and let workers take unpaid leave because the more they produce, the more they will lose. In this difficult situation, banks are willing to lend, but the company does not dare to borrow...
On the banks' side, although deposit and lending interest rates have decreased, due to low demand for loans, there is a lot of money stagnant in banks and to increase credit growth, banks want to have borrowers.
The representative of the State Bank of Vietnam, Nghe An branch, also affirmed: Nearly a year ago, it was difficult to borrow money from banks, but now the liquidity of commercial banks in the area has improved significantly, but the number of borrowers is still limited. In fact, in order to grow and meet payment capacity, at some points, banks have adjusted interbank interest rates; at the same time, they have adjusted interest rates for some loan terms. However, this is only a solution to compensate for local liquidity shortages at some banks before and after Tet, while the general payment capacity is quite guaranteed.
Mr. Trinh Duong Chinh - Director of Nam A Bank Nghe An branch added: Every year, each system assigns credit growth targets (including loans and mobilization) to branches, but in the first 2 months of the year, the whole industry experienced negative growth, putting commercial banks under a lot of pressure. Ineffective business will affect the credit growth targets of the whole system and the economy.
Research at local commercial banks, from Vietinbank, Vietcombank to Sacombank, Vietbank, Ban Viet Bank... all confirmed that the number of customers and loan contracts as well as mobilization have decreased compared to the same period last year. Previously, customers had to approach banks to apply for loans and disbursements, but this year, banks have to go to the grassroots to search for customers and provide loan advice.
Credit growth does not come with increased risk
A representative of a joint stock commercial bank in Vinh City also explained: The low and even negative growth rate of deposits and loans puts banks in a dilemma. If lending conditions are too strict, customers will not borrow and will not meet growth targets, but if lending is loosened and loans are given easily, there is a risk. bad debt increases . This person analyzed that, in one way or another, outstanding debt in the land and real estate construction sector often accounts for up to 60% of total outstanding debt at commercial banks. Therefore, currently, tightening real estate lending also helps ensure system safety, but the consequences are The real estate market is frozen and less vibrant.
In addition, one of the reasons why interest rates have decreased, but people still choose to save is because the investment channel in stocks and bonds has not been truly transparent, creating trust for investors and the market after recent failures and frauds. In the above context, according to Mr. Tran Anh Son - Chairman of the Provincial Association of Outstanding Enterprises, the safe solution is for businesses to fall into a defensive position, clustering to "preserve their strength" through the recession, and only when the economy improves will they boldly borrow capital to invest in business.
As for the banks, as far as we know, in the face of the above difficult situation, the "big guys" such as Agribank, Vietcombank, Vietinbank or BIDV have all committed to specific measures to reduce costs, improve credit quality, reduce loan interest rates, simplify loan procedures, disbursement... to share, accompany businesses and support the economy...
On the business side, some project investors, instead of waiting, have restructured their investment plans, calling for joint venture partners to implement, both sharing investment opportunities and reducing risks... Enterprises such as Song Lam Cement Joint Stock Company, Hoang Mai Cement Joint Stock Company, Trung Do Joint Stock Company and enterprises producing and processing stone cladding and wood chips in Quy Hop and Nghia Dan districts, when facing difficulties in exporting, have sought to sell and consume in the domestic market... Some enterprises and business associations have boldly connected and expanded relations with partners and trade promotion brokers to find new markets.
To ensure capital supply for the economy and support businesses to overcome difficulties, along with implementing solutions to ensure credit safety and manage bad debts, the State Bank assigned commercial banks to complete the credit growth targets assigned to each bank from the beginning of the year; at the same time, encourage commercial banks to seek and provide sufficient capital associated with local socio-economic development goals; promptly propose solutions for the State Bank to consider removing difficulties and obstacles with projects, priority packages, and interest rate support; strive for mobilization growth of over 13% and outstanding loans of over 8.8% - the 2023 milestone has been achieved.
![[Photo] Prime Minister Pham Minh Chinh chairs Government Conference with localities on economic growth](https://vstatic.vietnam.vn/vietnam/resource/IMAGE/2025/2/21/f34583484f2643a2a2b72168a0d64baa)
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