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Vietnam would have to pay dearly if it pushes credit too far

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Vietnam would have to pay dearly if it pushes credit too far Empty Vietnam would have to pay dearly if it pushes credit too far

Post by 1alaskan Mon Apr 23, 2012 11:44 am

Vietnam would have to pay dearly if it pushes credit too far

VietFinanceNews.com - The ceiling deposit interest rate has been slashed to 12 percent per annum from 13 percent. However, as the production remains stagnant, the 15-17 percent credit growth rate may be unattainable.

15-17 percent a far-away goal

In the first quarter of 2012, the minus credit growth led to the dissolution of tens of thousands of businesses. The State Bank of Vietnam has lowered the ceiling interest rate in an effort to help ease businesses’ difficulties.

However, the efforts by the central bank seem to “fatten” commercial banks only, while they have not helped businesses escape from their difficulties. The capital flow has been moving around within the banking system or going to state owned enterprises, while capital has not pumped into the national economy which is in serious thirst for capital.

The State Bank of Vietnam has been urged many times to take more drastic measures to put the capital flow through, thus helping lift businesses’ difficulties.

Meanwhile, Governor of the State Bank of Vietnam Nguyen Van Binh keeps optimistic about the lending in 2012.

“The credit saw the positive growth rate of one percent in March 2012. With the average growth rate of 1.5-2 percent per month, the targeted credit growth rate of 15-17 percent by the end of the year proves to be within the reach,” Binh stated.

However, Vu Viet Ngoan, Chair of the National Finance Supervision Council, has pointed out that with the current status of enterprises and the national economic growth, it would be very difficult to obtain the 15-17 percent credit growth rate in 2012.

“The credit may grow by 5-6 percent at maximum in the second quarter of 2012, while the figure would not be able to reach 12-13 percent in the last six months of the year to raise the credit growth rate to 15-17 percent in the whole year as expected,” Ngoan said.

He has warned that if Vietnam still tries to push credit up too far, the national economy would have to pay a high price for this by early 2013.

Agreeing with Ngoan, Associate Professor Dr Dao Van Hung, Director of the Policy and Development Institute, a member of the National Advisory Council for Monetary Policies, also said that big difficulties would still exist until the end of June 2012, which would make unfeasible to obtain the credit growth rate of 2 percent every month.

Ngoan said that it is necessary for policy makers to anticipate the consequences to occur as a result of he low credit growth, and find out solutions to the problems. Loosening the fiscal policy is a suggested solution.

Other economists have voiced the same viewpoint that Vietnam does not necessarily obtain the credit growth rate of 17 percent this year, because it still needs to focus on fighting against the high inflation. However, they say, if Vietnam tightens credit, it needs to open other policies to ease enterprises’ difficulties.

Dr Vu Dinh Anh has emphasized that the problem now for Vietnam is not the lack of capital, but the capital jam. Therefore, it is necessary to find out the points of jams and apply reasonable policies to put the capital flow through.

Ngoan has denied the central bank’s report that only 6 percent of commercial banks have liquidity problem. “It is not true that the banks’ liquidity is not profuse. A part of banks still has weak liquidity. If the liquidity problem of the banks cannot be settled, the whole banking system would be influenced, and the interest rate reduction would not turn realistic,” Ngoan said.


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