Vietnam should be cautious about credit growth: Moody's

By Ngan Anh   January 29, 2018 | 02:53 pm GMT+7
Vietnam should be cautious about credit growth: Moody's
An employee holds stacks of cash for counting at a bank in Vietnam. Photo by VnExpress/Anh Quan

'Easier monetary policy risks undermining macroeconomic stability, particularly amid already rapid credit growth.'

Furtheer easing of monetary policy could pose risks to Vietnam's economy and banking sector, according to Moody’s Investors Service.

“Given the government’s focus appears to be towards supporting headline growth, the State Bank of Vietnam may continue to pursue a neutral to accommodative policy stance,” Bloomberg quoted Anushka Shah, an analyst for the credit ratings agency in Singapore, as saying.

“However, easier monetary policy risks undermining macroeconomic stability, particularly amid already rapid credit growth,” Shah said. “A continued acceleration in credit growth could also pose some risks to the banking sector by eroding banks’ capital buffers.”

Deputy Governor Nguyen Thi Hong said the central bank will “manage credit growth in a flexible and cautious manner in order to help companies and boost economic growth, while still being able to limit risks in some business areas.”

Vietnam’s economy grew by 6.81 percent in 2017, compared with 6.61 percent the previous year, the highest in a decade, according to the General Statistics Office.

Can Van Luc, chief economist at Vietnam’s top listed bank BIDV, said the country should not try to boost credit growth at any cost. “Credit has expanded rapidly in recent years. It is time to be more cautious.”

Vietnam has one of the highest credit growth rates in Asia, he said. The country’s banking sector posted an estimated 18.17 percent in loan growth in 2017, according to the Ministry of Finance. It has also targeted growth of 17 percent this year.

The central bank recently asked lenders to tighten control of investment loans intended for the stock and real estate markets, warning about risks of bad debt.

It urged them to give priority to agriculture, exports, supporting industries and high-tech investments.

 
 
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