Credit growth is difficult to reach the target

	Credit growth is slow, many banks "suffered" loss of profit in the third quarter
	Year-end credit growth problems

Year-end credit may grow higher, but achieving the 14% target is not feasible. Photo: Internet

Do not "force" the credit growth target at all costs

In the last months of 2023, low credit growth is a big problem for the banking industry, regulatory agencies and Government leaders. Many meetings and conferences to discuss solutions to promote growth have taken place, and the Prime Minister has also signed a telegram on managing credit growth in the last months of 2023.

But according to the State Bank (SBV), the difficulty is mainly objective factors; not only the credit of countries around the world but also Vietnam increases slowly due to the decrease in world aggregate demand. By the end of November 2023, credit to the economy reached about VND 13 million billion, an increase of 9.15% compared to the end of 2022. Compared to the credit growth rate of 14% for the whole year that the State Bank set from the beginning year; there is still about VND 700,000 billion of credit that needs to be added to the economy.

​The problem of low credit growth did not reach the set goals, to access to credit is difficult, which forced Deputy Prime Minister Le Minh Khai to request the Government to inspect the and carry out assigned functions and tasks of the State Bank in managing credit growth.

Currently, the situation at the end of 2023 and early 2024 has many positive signs, deposit interest rates have dropped to a record low, helping lending interest rates also decrease. According to estimates by the State Bank, credit for some strong export products such as rice, coffee, forest products and some manufacturing sectors is showing positive signs, increasing higher than the general credit growth rate of the whole economy.

For example, by the end of November 2023, credit for the export sector reached about VND 322,000 billion, accounting for 2.53% of total outstanding loans, an increase of 11.61% compared to the end of 2022; Credit for the supporting industry sector reached over VND 350,000 billion, accounting for 2.75%, an increase of 18.54% compared to the end of 2022; Credit for high-tech application businesses is about VND 45,400 billion, accounting for 0.36%, an increase of 17.99% compared to the end of 2022...

According to experts, with the proposed solutions, credit growth at the end of the year can be higher, but achieving the target of 14% is not feasible, it is estimated that it can only stop at about 11%. A report from HSC Securities Company stated that credit growth will accelerate in December with an increase of 2.5-3% compared to the previous month, thereby helping credit growth in 2023 to reach about 10.5-11%. According to a report by VNDirect Securities company, by the end of 2023, credit growth will improve and reach 10% compared to the beginning of the year thanks to the recovery of manufacturing industries with increased production orders. The construction industry recovered thanks to the promotion of public investment in the last months of the year and domestic consumer demand increased again during the year-end holidays.

With this situation, there are even opinions that to stimulate credit growth, we should consider expanding credit channels for real estate because the demand for real estate is still very significant. Economic expert, Dr. Pham The Anh, National Economics University, said that the credit growth target should not be "forced" at all costs to achieve the GDP growth target because demand-side drivers such as investment, consumption, Exports are weak while credit to real estate is like a "double-edged sword". Measures to promote and loosen credit in non-essential segments will further unbalance the real estate market.

Consider credit room

Under the direction of Deputy Prime Minister Le Minh Khai, the Government Inspectorate is required to inspect the construction, assignment and administration of targets and credit growth limits in 2022 and 2023 because of the The allocation of credit growth limits to credit institutions is considered not truly scientific, timely, or effective.

In fact, the credit room operating mechanism implemented since 2011 is an issue that has caused many experts to give mixed opinions, especially when many times credit has encountered difficulties due to room restrictions. In the middle months of 2022, because of strong credit growth in just the first half of the year, many banks used up all their room, leading to not meeting enough loan needs. In 2023, although the loan situation is the opposite, credit growth will be unevenly distributed among banks. Some banks have double-digit growth so they have almost run out of room, but there are many banks that are not only a meager growth of a few percent.

To support credit growth, from the beginning of December 2023, the State Bank decided to divide market share of the credit, moving the credit growth limit from surplus to shortage, with the initiative from commerce banks. But in early 2023, according to the Vietnam Confederation of Commerce and Industry (VCCI), the legal basis for the credit growth limit policy is not still specific. This makes VCCI worried that it could lead to ambiguity in the allocation of credit room to commercial banks.

In addition, some banking experts have also expressed that the use of credit room tools which can cause unfair competition between banks is an administrative measure, heavily asking - giving, and at the same time it must be balanced with inflation to set a reasonable growth threshold. Therefore, many experts recommend that the State Bank regulate credit through technical tools such as capital adequacy ratio (CAR), LTD index (credit balance/mobilized capital), short-term capital ratio for medium and long-term loans... and can regulate the money supply to the market through adjusting operating interest rates.

Regarding this issue, during the Conference to discuss solutions to overcome difficulties in credit growth on December 7, Governor of the State Bank of Vietnam Nguyen Thi Hong said that the State Bank is reviewing and re-evaluating the entire regulatory process about credit room targets both positive and negative aspects. In the future, according to the Governor, whether credit room continues to be maintained or what roadmap or not... will be in the spirit of overcoming limitations and creating conditions to ensure criteria for controlling credit risks.

Clearly, as many times the SBV leaders have expressed, operating monetary policy in the current context is very difficult, not only having to solve the internal problems of the banking industry but still having to respond quickly to the current context. The world economy fluctuates unpredictably, and the economy has great openness. Therefore, credit growth requires synchronous implementation of many solutions, from efforts to reduce interest rates to adjusting mechanisms and policies accordingly.

Besides, effective coordination between monetary policy and fiscal policy is needed for economic growth. Dr. Pham The Anh suggested that there should be additional stimulation from fiscal policy for growth, with solutions such as accelerating public investment in infrastructure projects, developing social housing, and stimulating consumption through social security benefits for poor households and people who have lost their jobs, value added tax reduction on domestic essential goods...