Thoi Bao Kinh Doanh
Recently, the government has asked the State Bank of Vietnam (SBV) to calculate the ability to raise the credit growth target for the whole year to 21-22 percent instead of 18%. If this goal can be achieved, this is the year that marks the return after seven years of credit growth at less than 20%.
As per the National Financial Supervisory Commission (NFSC), during August 14-18, interbank interest rates may increase slightly 0.3-0.5 percentage points in terms but as of August 25, interbank interest rates gradually decreased to 1-1.3%.
As per NFSC’s assessment, the current interest rates in the interbank market are still relatively low and are similar to the same period of 2016. It is forecasted that the low interest rates will maintain in Q3/2017.
The State Bank issued 15 trillion dong worth of T-bills via outright method with 7-day term and 0.3 percent interest rates. During August 21-25, there were 21 trillion dong matured T-bills under outright method. generally, the State Bank net withdrew six trillion dong during the week.
As per NFSC, it is expected that at the end of this week, there will have 15 trillion dong matured T-bills under outright method while T-bill interest rate still maintains at record low level of 0.3-0.4%.
The plentiful liquidity of the banking system along with flexible operating policies, stable lending rates, even the downward trend of interest rates in some priority sectors, etc. are positive factors that support the economy and the credit growth target.
Earlier, in the government’s regular meeting in July, the prime minister asked to raise the whole year credit growth target to at least 20%. If this target is completed, this year will be the first year since 2010 that credit growth is more than 20%.
With the prime minister’s aforementioned suggestion, if this year’s credit growth reaches the highest level of 22%, that means a four percent increase in capital from the initial estimate (at 18%), equal to about 220 trillion dong.
As per the estimate of economic experts, the total outstanding loans to the economy at the end of 2016 was about 5,500 trillion dong, equal to the growth rate of 22 percent in the aforementioned assumption, which may have an additional of about 1,210 trillion dong this year.
NFSC’s data show that in the first seven months of this year, credit has grown about 9.3%. Following the aforementioned growth direction of 22%, there will have about 698.5 trillion dong additional capital to accrue in the last five months of the year.
Many credit experts said since the beginning of this year, credit has grown quite strongly in terms of outstanding loans especially consumer credit and real estate credit. Meanwhile, in production sector, many businesses still have difficulties in assessing loans.
As per the data of the Business Registration Department under the Ministry of Planning and Investment, in the real estate business sector, in January-August, the number of newly established businesses were 3,156 units (up 65.8%) and the registered capital was 217.139 trillion dong (up 62.8%)
That means real estate is showing signs of prospering again. Therefore, the massive increase in credit may cause real estate sector to absorb the most capital not business and production sector.
Dr Vo Tri Thanh, former deputy Head of the National Economic Research Institute (NERI) said the total real estate outstanding loans are about eight percent out of the total credit but consumer loans are mostly real estate loans. If that is included, the figure must be more than 10%.
Interbank interest rates are currently relatively low and tend to decrease in the near future, but with the likelihood of adjusting lending rate to achieve the credit growth target under the requirement of the prime minister, the State Bank is likely to pour to the market nearly 700 trillion dong.
The end of the year is the time when the demand for real estate booms, especially the low-cost housing segment and resort real estate. The people’s consumer loans to purchase houses have increased rapidly over the last period and is expected to continue rising sharply in the last five months of the year.
So, is there any other way to limit the flow of money into real estate? As per economic experts, money from bank from now until the end of the year, though unwilling, is still most likely to run partly into real estate. Therefore, the State Bank must have monetary tightening policies to divest this capital flow to the right target. Only by doing so can the economy really be supported.
It is known that the State Bank has directed functional departments to tighten control over outstanding loans in potentially risky areas such as real estate, BOT and securities. For example, in Directive 01/2017, the State Bank requires commercial banks to regularly review and assess the lending to potentially risky areas such as real estate credit, loans secured by real estate, credit for large customer groups, etc. to set appropriate management criteria, ensuring safety and efficiency in operation.