Vietnam lowers credit growth cap to deter high-risk loans
VIETNAM’S central bank on Monday (Jul 10) lowered its cap on credit growth for this year to 14 per cent from 15 per cent, a small tweak that may be meant to send a warning to lenders to remain vigilant when dealing with risky borrowers.
The export-oriented country is facing sluggish economic growth due largely to a drop in global demand for the goods it produces and assembles, just as it is trying to revive a real estate sector weighed down by bad debt and excessive supply of high-end property.
The State Bank of Vietnam (SBV) “adjusted the credit growth target to provide more capital to meet the needs of the economy in a timely manner, but at the same time remained cautious about inflation risks”, it said in a statement.
The move is a minor adjustment to the bank’s existing policy which had targeted 14 per cent to 15 per cent credit growth, and in part reflects the slower-than-expected lending growth, which, by the end of June, was still below 5 per cent from the start of the year.
In the second half of June, however, credit growth accelerated from 3.36 per cent on Jun 15.
In a press conference last month SBV deputy governor Dao Minh Tu said the bank wanted higher credit growth but it also aimed to avoid supporting lending “uncontrollably and unhealthily”.
Excessive credit to high-risk sectors is seen as another possible drag on economic growth, which in the first half of the year stayed below 4 per cent, compared with the government’s 6.5 per cent target for the year.
The real estate sector has been dogged by a credit crunch in past months, triggered by a government anti-corruption campaign and stricter rules on the issuance of corporate bonds.
The government earlier this year introduced measures to support credit to companies and postponed part of its corporate bond reform plan.
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