While Vietnam is enjoying higher GDP growth, the rise in bad debt in the banking system is cause for concern A contrast between GDP growth and bad debt In the first nine months of 2024, Vietnam’s gross domestic product (GDP) grew by 6.82% over the same period last year, with growth in Q3 alone put at a robust 7.4%, way above 5.66% in Q1 and 6.93% in Q2. This was a steady economic recovery following the Covid-19 pandemic and amid global economic uncertainties. Reports also reveal improving economic indicators, especially from Q2 onward, with major sectors such as industrial production, particularly manufacturing and processing, foreign trade, and services contributing positively to overall growth. Private-sector investment is also gradually recovering, backed by Vietnam’s favorable economic outlook. This recovery theoretically supports businesses in enhancing their financial capacities, expanding operations, and positively impacting bank credit quality. It is because when businesses perform well, they have better capacity to pay debt, thus easing the pressure on the banking system. However, despite higher GDP growth, bad debt risks continue to increase. According to recent data from the State Bank of Vietnam (SBV), the bad debt ratio within the banking system was 4.75% by the end […]
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