HANOI- Borrowing in Vietnam’s high-risk sectors remained under control, while credit growth was less than expected despite banks’ abundant liquidity, a deputy governor of the central bank said on Wednesday.
Credit growth as of June 15 was seen at 3.36 percent against the end of 2022 and was much lower than the same period last year, Dao Minh Tu said at a quarterly news conference.
The State Bank of Vietnam (SBV) lowered key interest rates on Monday for a fourth time this year, in an effort to boost growth as the manufacturing-led economy weakens amid softening global demand.
The refinance rate was cut to 4.5 percent, the discount rate to 3.0 percent and the electronic interbank rate to 5.0 percent – they were all reduced by 50 basis points (bps).
“There are multiple reasons for the slower credit growth especially faded demand to expand business and weak spending by borrowers,” Tu told reporters.
“We definitely want a higher credit growth, but not by lowering the standards to pump out credit uncontrollably and unhealthily,” Tu said, adding that banks had abundant liquidity.
The SBV has targeted credit growth at 14 percent to 15 percent for this year.
Tu said credit for risky sectors was well-managed, but noted that the country’s corporate bond and stock markets were facing difficulties that have posed challenges for regulators.
Inflation remains under 4 percent and the SBV continues to buy foreign currency to strengthen its own reserves, he added, without elaborating.
Vietnam’s consumer prices in the first five months rose 3.55 percent from a year earlier. The government is targeting average inflation of 4.5 percent for the year.
“Eyeing the end of this year, SBV’s policies will remain cautious and flexible, Tu said, adding that stabilizing interest rates and inflation remained the main goals.
SBV last week delivered its latest round of interest rate cuts this year in an effort to boost growth as the manufacturing-led economy weakens amid softening global demand.
Vietnam targets economic growth of 6.5 percent this year, slower than an expansion of 8.02 percent last year.
