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Sunday, July 21, 2024

Is credit a magic wand for growth?

By Trieu Minh

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Historically, loose monetary policy and credit growth have been seen as one of the most fundamental and important solutions to stimulate economic growth. Is this still true today? An inevitable slowdown? The State Bank of Vietnam (SBV), the central bank, recently issued Document 4462/NHNN-CSTT asking local banks and foreign bank branches to take certain measures regarding lending and interest rates. Besides the goal of cutting lending rates by an additional 1-2 percentage points at the request of the Government, the SBV has instructed credit institutions to continue boosting credit growth so as to expand loans by 5-6% in the entire banking system by the end of the second quarter of this year. Nevertheless, it is hard to deny that the credit slowdown from last year to this year is an inevitable outcome. According to the latest data from the SBV, loans by May 20 had increased by a slight 2.41%, or VND327 trillion, against early this year. Compared to the growth rate of 1.34% at the end of the first quarter, it can be seen that credit growth in the nearly two months has added less than 1.1 percentage points, equivalent to about VND145.2 trillion. At this rate, it would […]
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