Higher credit growth creates momentum for economic acceleration

In the article "Innovation, creativity, acceleration, breakthrough, bringing the country steadily into the era of national growth, prosperity, civilization and prosperity" on the occasion of the New Year, Prime Minister Pham Minh Chinh emphasized that in order to successfully implement the strategic goal of striving by 2030 for Vietnam to be a developing country with modern industry and high average income, and by 2045 to become a developed country with high income; from 2025, it is necessary to make maximum efforts, create breakthrough factors to attract investment, strongly promote production and business, strive to achieve a growth rate of at least 8% or higher in favorable conditions; on that basis, create a solid foundation to achieve a double-digit growth rate from 2026.

Credit expected to increase by 16%

With the above growth target, it is necessary to mobilize resources in the economy, in which bank capital plays an extremely important role. Following the Government's direction, the State Bank has recently sent a document to credit institutions to publicly and transparently announce the principles of credit growth allocation in 2025. Accordingly, the State Bank expects the credit growth of the whole system in 2025 to be about 16% and continues to implement credit management solutions in line with macroeconomic developments to contribute to promoting economic growth and controlling inflation. The credit growth target allocation of credit institutions is based on the results of the 2023 ranking score as prescribed in Circular 52/2018/TT-NHNN (amended and supplemented) multiplied by the coefficient applied to banks. According to experts, this is a proactive move by the State Bank for credit institutions to use as a basis to develop appropriate credit growth plans from the beginning of the year. The expected growth figure of 16% has been considered and calculated by the executive agency based on the actual situation and in line with the economic growth orientation of 2025.

To successfully achieve the strategic goal of striving for Vietnam to be a developing country by 2030 with modern industry and high average income, and to become a developed country with high income by 2045; from 2025, we must make maximum efforts, create breakthrough factors to attract investment, strongly promote production and business, strive to achieve a growth rate of at least 8% or higher in favorable conditions; on that basis, create a solid foundation to achieve double-digit growth from 2026.

Prime Minister Pham Minh Chinh

Experts also believe that credit growth of 16% in 2025 is appropriate and achievable. In the latest report, MBS Research expects credit growth in 2025 to reach 15-16% based on two main factors. That is from the strong recovery of the Vietnamese economy in 2025, driven by improved production and trade activities thanks to increased domestic and foreign demand. This will create conditions for the SBV to maintain a loose monetary policy this year. Second, the high disbursement rate of public investment is expected to create jobs and support credit demand, in line with the goal of economic recovery and the implementation of major infrastructure projects in Vietnam in the 2021-2025 period.

According to ACB Securities Company (ACBS), the corporate bond channel is not expected to recover soon, so bank credit still plays an important role. At the same time, ACBS also expects the real estate market in 2025 to gradually recover, combined with the Government's promotion of public investment, thereby stimulating increased credit demand, supporting bank lending yields in the second half of 2025.

According to Dr. Chau Dinh Linh, Banking University of Ho Chi Minh City, the mutual relationship between credit growth and GDP has been very clear in recent years. Credit plays an important role in the "three-horse carriage" of investment, consumption, import and export to promote economic growth. Compared to 2024, the expected credit growth of 16% in 2025 is only slightly higher, but the absolute amount of capital pushed into the economy will increase significantly.

However, this expert also emphasized the need to ensure the quality of loan capital, because bad debt is still a constant concern for the banking industry, especially in the context of unpredictable fluctuations in the world and domestic economy. Therefore, in parallel with promoting credit, banks need to focus on directing capital flows towards priority areas, which are the launching pad for economic growth, avoiding capital flows into areas with many potential risks, and improving the ability to assess and appraise credit.

Low interest rates have actively supported people and businesses.

Moving towards eliminating credit "room"

In addition to the expected credit growth rate, the State Bank also said that it will continue to implement a roadmap to limit and eventually eliminate the allocation of credit growth targets for each credit institution according to Resolution No. 62/2022/QH15 dated June 16, 2022 of the National Assembly.

The move to eliminate the credit “room” has been discussed a lot recently to ensure that credit growth is managed according to market mechanisms. However, experts also agree that there needs to be a specific and cautious roadmap to gradually eliminate the current credit management mechanism.

According to Dr. Chau Dinh Linh, the fact that the State Bank has had to maintain the credit limit policy since 2011 also stems from the actual conditions of Vietnam. Lessons learned from the period of hot, uncontrolled credit growth have left very serious consequences such as interest rate competition, sharply increasing bad debt... Removing the credit room is certainly a good thing to do, but the State Bank needs to provide a specific, clear roadmap and conditions to be able to remove this tool while still ensuring the safety of the banking system. Although banks have made great efforts to improve their financial capacity and scale of operations in the past, there is still a difference in "health" between banks. Currently, many banks have applied Basel II standards, some banks have even applied some regulations of Basel III. However, up to this point, there are also banks that have not been able to apply Basel II standards. Therefore, without limits, credit growth can easily exceed the management capacity of some banks. Meanwhile, the bad debt ratio tends to increase... affecting the restructuring process of the credit institution system in particular and the economy in general.

Sharing the same view, Dr. Le Duy Binh - Director of Economica Vietnam affirmed that the Government is currently implementing many measures to support and relieve difficulties in the capital market and the economy. However, the burden of capital supply continues to be placed on the banking system. Vietnam is also a country that many international organizations have warned about outstanding debt.

Credit/GDP is already at a high level. Therefore, in the current context, the credit room tool will partly ensure credit growth in line with GDP growth rate.

“In a specific roadmap, it is possible to consider removing the credit room tool. However, it needs to be approached cautiously, implemented step by step to ensure synchronization of necessary conditions and in accordance with market conditions,” Dr. Le Duy Binh recommended and noted that in order to remove the credit “barrier”, it is first necessary to develop a more diverse capital market, reducing medium and long-term capital pressure on the banking system. Next, it is important to strengthen the internal strength and health of banks. Banks themselves must improve their resistance and demonstrate their good risk management capabilities.

Source: https://thoibaonganhang.vn/tin-dung-tang-cao-hon-tao-dong-luc-cho-kinh-te-tang-toc-159546.html