It is undeniable that Vietnam’s economic growth is increasingly reliant on monetary policy, while the effectiveness and ripple effects of fiscal policy have yet to fully materialize as expected. However, dependence on credit expansion could pose significant risks to the economy. The link between credit and growth To achieve 1% gross domestic product (GDP) growth, credit must expand by more than 2% on average. For instance, GDP grew by nearly 7% in 2023 while credit growth stood at 14.55%. In 2024, GDP growth reached 7.09%, supported by a 15.08% increase in credit. According to a representative of the State Bank of Vietnam (SBV), the central bank has set a credit growth target of 16% in 2025 to support an 8% GDP growth rate. If economic growth is to reach 10%, credit expansion should be between 18% and 20%. By the end of 2023, total outstanding loans amounted to around VND13.4 quadrillion, rising to VND15.5 quadrillion by the end of 2024. This means that in 2024 alone, an additional VND2.1 quadrillion in credit was injected into the economy. Over the course of the year, total loan disbursements reached VND23 quadrillion, while debt repayments amounted to VND21 quadrillion to sustain GDP growth […]
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