No expansion of credit growth target: central bank

Expanding the target will affect the system’s liquidity and lift up interest rates, deputy governor Pham Thanh Ha said at the Vietnam Socio-Economic Forum 2022.

The central bank will not expand the credit growth target of 14 percent set for this year, he said. Vietnam’s credit growth stood at 12.17% in 2020 and 13.61% in 2021.

“Amidst the global tightening in financial markets and high inflationary pressures, the State Bank of Vietnam is trying to keep credit growth higher than the past two years to support recovery,” he said.

Before 2011, the country’s credit growth was very high at over 30%, but over the past 10 years, the central bank has tried to keep it at 12-14%.

So far this year, credit growth was more than 10%, a significant increase against the same period in several previous years, he added.

The Consumer Price Index (CPI) rose just 2.58 percent in the first eight months of this year, but inflation pressure remained high. “All mobilized capital of banks has been used up for lending. If credit growth is expanded by some percentage points, it will affect the system’s payments, and interest rates will go up,” Ha said.

International rating agencies like Moody’s have said Vietnam’s credit-to-GDP ratio is over 124% now. The credit-to-GDP ratio has surged to this point from 80% ten years ago, Ha noted.

“The State Bank of Vietnam will consider using other measures to manage credit, but the credit growth quota cannot be removed in the short term,” he reiterated.

Vo Tri Thanh, former director of the Central Institute for Economic Management, said: “Credit growth of 14% is reasonable in both the short and long term. If it is loosened, the pressure on interest rates and exchange rates will be great, creating the risk of capital bleeding.”