15:49 | 28/05/2015 Finance - Banking
(VEN) - Credit pouring into the economy during April was the highest in the last three years. Capital flows were especially healthy in major sectors such as industry, construction, and other prioritized areas clearly indicating Vietnam’s economic recovery.
The balance of outstanding credit has risen high in many localities this year. In particular, bank capital pouring into production and trading in Hanoi has increased by 6.6 percent against the end of 2014. According to the Hanoi Statistical Office, the balance of outstanding loans in the capital reached about VND1,077 trillion in April, an increase of 0.8 percent from the previous month, and an increase of 6.6 percent from December 2014.
According to economists, at the current momentum of growth, the banking system is likely to reach its credit growth target of 13-15 percent this year.
A large amount of capital has been poured into major sectors, helping to improve the economy’s health. According to the latest statistics from the State Bank of Vietnam, the total balance of outstanding credit for the economy exceeded VND3,990 trillion by the end of February, a 0.65 percent increase from the end of 2014. Of this, credit for industry and construction accounted for the largest percentage exceeding VND1,394 trillion, while credit for other services amounted to more than VND1,317 trillion.
Little room for interest reductions
According to economists, at the current momentum of growth, the banking system is likely to reach its credit growth target of 13-15 percent this year. However, businesses are still hoping for easier access to capital resources and further reductions of loan interest rates. In its report on the future of the Vietnamese macro economy, the Vietnam Institute for Economic and Policy Research (VEPR) forecast that loan interest rates are unlikely to drop further since banks are facing problems with their restructuring itineraries and resolving their bad debts. According to the VEPR’s experts, the State Bank maintained the managing interest rate in the first quarter of this year and is under no pressure to change major interest rates. The VEPR also said that the private sector currently has to compete with the public sector in terms of credit. The annual interest rate of government five-year bonds currently stands at 5.3 percent, ten-year bonds 6.4 percent, and 15-year bonds 7.2 percent. The reductions in bond interest rates are slowing, and there is little room for banks to further reduce their loan interest rates, according to the VEPR./.
By Duy Minh