Since the beginning of the year, credit growth has shown signs of recovery as demand for loans has improved across various sectors. However, this growth has been accompanied by an increase in bad debt, and the Vietnamese economy is facing a myriad of challenges given ongoing global geopolitical tensions. Credit plays a crucial role in capital flow, so boosting credit growth is essential for economic development. Yet, given Vietnam’s small, highly-exposed economy, accelerating credit growth requires strict risk management to avoid negative repercussions. Current state of credit growth As of October 11, 2024, credit in the banking system expanded by 8.78% against the end of 2023, a slight increase from 8.53% at the end of Q3 2024. Credit balances have generally accelerated since the latter half of Q2, following a slow start in the first five months of the year. Credit growth at the end of Q3 was much higher than at the same time in 2023 (5.73%) and 2021 (7.17%), though significantly lower than in 2022 when the real estate and corporate bond markets faced disruptions. While credit growth improved significantly in Q2 and Q3, it remains well below the State Bank of Vietnam’s (SBV) 15% target for 2024. […]
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