Credit growth target looks distant

The State Bank of Vietnam (SBV) said in its latest report on monetary policy monitoring and banking activities that: “The whole banking system will try to reach the credit growth target of 8-10 per cent during this year’s remaining six months.”

This target would help the government curb inflation at 6-8 per cent and fuel struggling enterprises, said the report.

However, Central Institute for Economic Management vice head Vo Tri Thanh said  in this year’s first seven months, the credit growth rate was expected to be just 0.76 per cent, putting the target out of reach.

The SBV also admitted in the report that: “It will be very difficult to swell credit in the coming months.”

“Low demand for credit results from low demand for production and consumption locally and internationally. Enterprises are in big difficulties with big inventories. This has limited enterprises’ absorbability of banks’ loans,” said SBV governor Nguyen Van Binh.

Prime Minister Nguyen Tan Dung in early May said the government would strongly expand credit to 10 per cent every month in the year’s remaining months.

“Good disbursement from banks will push local purchasing power and create more employments. We have much financial resources to disburse. But I am afraid that we cannot boost disbursement due to enterprises being unable to absorb bank loans,” Dung said.

The State Bank has five times since early this year reduced the annual refinancing rate from 15 to 10 per cent and the annual re-discounting rate from 13 to 8 per cent. It has also decreased by four times the maximum deposit interest rate in the dong from 6 to 2 per cent, per year, for non-term deposit and deposit with a less-than-one-month term, and from 14 to 9 per cent, per year, for deposit with a term of one to less than 12 months.

The SBV has also cut the annual lending rate from 15 to 13 per cent for four prioritised sectors including agriculture and rural development, exports, small- and medium-sized enterprises and supporting industry.

However, Nam Dinh People’s Committee’s chairman Nguyen Van Tuan raised doubt over the targeted credit growth.

“The target will be feasible if more favourable conditions in access to bank loans are given to enterprises. At present, only 150 enterprises out of the province’s nearly 5,000 enterprises can access bank loans,” Tuan said.

In another case, it was reported at a recent meeting between enterprises and leaders of banks in Ho Chi Minh City that only 650 enterprises out of the city’s more than 100,000 enterprises could access banks’ preferential loans.

Le Xuan Nghia, former vice head of the National Financial Supervision Committee, said from July to the year’s end, if the credit monthly grew 1 per cent, the economy would grow 4.9-5.1 per cent for 2012 and the monthly inflation rate for this year’s remaining five months would be 0.5 per cent.

If the credit grew 10 and 12 per cent, respectively, the economy would grow 5.2-5.6 per cent, respectively, and the monthly inflation rate for this year’s remaining five months would be below 1 and 2 per cent, respectively, meaning high inflation might recur.

He warned Vietnam was in peril as banks could not offer loans though they had cash, while enterprises could not access such loans.

The Ministry of Planning and Investment reported this year’s first half saw 26,324 enterprises dissolve and cease operation, up 5.4 per cent on-year, largely due to lack of capital and markets for their products.