Bank credit grows at measly 2% in Q1

"Credit demand has gone down in some areas partly because enterprises lacked orders and production was stagnant," Dao Minh Tu, deputy governor of the State Bank of Vietnam, said while speaking to reporters Friday.

The president of the Ho Chi Minh City Business Association, Nguyen Ngoc Hoa, said due to weak global demand, Vietnamese industries producing key export items such as garments, seafood and wooden products saw low growth in the first quarter.

Many steel and cement plants ran at only 10% capacity, he said. The meltdown of the real estate market also dried up credit demand, he said.

"Businesses tried to keep operations going despite the low demand, so there was no need to borrow." What businesses want are debts to be rolled over and interest rates to be cut, he added.

According to the central bank, deposit interest rates have decreased by 0.2-0.5 percentage points for terms of six to 12 months since March 6, enabling banks to reduce loan interest rates.

Full the full year bank credit is forecast to grow at only 12% this year since economic activity is slow and the property sector, usually the biggest borrower, is in a slump.

It grew at 14.5% last year.