There is not necessarily a causal relationship between economic growth and credit growth but rather they are correlated. Low credit growth can adversely affect economic growth, but it can also be the consequence of economic stagnation and a bleak economic outlook. Concerns over low credit growth Around this time last year, many banks had used up their credit growth quotas, with the credit growth industrywide as of the end of November 2022 exceeding 12%, prompting the State Bank of Vietnam (SBV) to raise the credit growth cap by an additional 1.5 to 2.0 percentage points. In December alone, credits rose by 1.92%, taking the credit growth for the entire 2022 to nearly 14.2%. This year’s performance is not that upbeat, as data updated to November 23 showed that the credit growth against the end of 2022 reached only 8.38%, far behind the target of 14.5% set for the whole year. If the target is to be achieved, banks need to pump around VND735 trillion into the economy in the rest of this year. Given the lower-than-expected credit growth this year to date as well as economic stagnation, many people have voiced concerns over slack lending. In July, the SBV announced […]
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