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The State Bank to maintain credit growth target of 14%

01/08/2022

On the afternoon of July 30, speaking at the meeting between the Prime Minister and ministries and sectors on macroeconomic stability, Governor of the State Bank of Vietnam Nguyen Thi Hong said that currently, the world and domestic economies are experiencing many complicated, unpredictable and unprecedented fluctuations.

As for the world economy, she said the move to raise interest rates by a margin of 0.75% each time in the past 2 months and higher than 4% p.a. by the Federal Reserve (Fed) is rare in history. The US dollar also tends to appreciate strongly against other currencies.

As for Vietnam, she said that our economy has a large openness, raw materials for domestic production are highly dependent on imports from abroad.

These developments, according to Ms. Hong, are a challenge to the Government's macroeconomic policy management in general and the State Bank's monetary policy management activities in particular.

On the part of the management agency, it is impossible to lower interest rates in the current context because this makes the value of Vietnam dong cheaper, causing foreign currency hoarding. Therefore, banks need to actively regulate short-term interest rates to stabilize exchange rates and the foreign exchange market.

With credit, the head of the banking industry said that the management agency still kept the credit growth target of 14% for the whole year of 2022, despite receiving some recommendations to increase the credit growth target to about 15-16%.

Explaining this, the Governor said that the accumulated credit growth from the beginning of the year to July 26, 2022 was 9.42%. This figure for the period from the end of July 2021 to July 26, 2022 is 17%. In contrast, the accumulated capital mobilization of the banking system in the first seven months of the year was estimated at 4.21%.

In addition, Vietnam's credit-to-GDP ratio - based on the new GDP calculation method - stands at 124%, as assessed by the World Bank (WB). This rate – based on the old way of calculating GDP – has surpassed 140%. These numbers, according to Ms. Hong, are among the highest in the world.

As for the ratio of credit/capital mobilization from market 1 (deposits of businesses and people) has reached 99%, which means that if the banking system mobilizes 100 dong, it will lend up to 99 dong.

In addition, the Prime Minister also directed on actively allocating cash flows to industries and fields that play a role in promoting economic recovery in the second half of 2022 such as public investment. Thus, a large amount of money will be put into the economy in the near future.

"In the above context, in the immediate future, the State Bank will still conduct monetary policy on the basis of credit growth for the whole year at 14%," Ms. Hong said.

 

Kylie Nguyen

© 2019 Vietnam Bank for Agriculture and Rural Development No. 2 Lang Ha street, Ba Dinh district, Hanoi, Vietnam
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