Boosting banking credit efficiency to achieve economic growth target

The recent report by the National Financial Supervisory Commission (NFSC) showed that banking credit in the first eight months of this year grew by 11.5% in comparison to the end of 2016.

Meanwhile, the average Consumer Price Index (CPI) in the first eight months of 2017 increased by 3.84%, over the same period last year, and the CPI in August increased by 1.23% over the CPI in December 2016.

To achieve the GDP growth rate of 6.7% for the whole of 2017, the GDP growth rate in the last six months of this year should be at 7.42%. At the same time, banking credit growth for the whole of 2017 must rise to 21-22%, instead of 18% as scheduled.

High-speed credit growth in a short period of time requires greater attention to the quality and effective use of credit to achieve the economic growth target set for the entire year, while not causing macroeconomic instability in 2017 and the subsequent years.

Banking credit growth should be focused on key sectors that will create the most positive impacts on GDP growth, while credit must be tightened in high risk areas such as real estate and securities, Anh said.

In addition, the credit efficiency must be aligned with investment efficiency, particularly in terms of the investment efficiency of the State economic sector, as the total investment capital for social development will be increased to 34-35% of the GDP instead of just 32.8% of GDP as in the first half of 2017.

If the quality and efficiency of banking credit and investment is not ensured, the risk of inflation and macroeconomic instability could occur from as early as 2018, despite the fulfilment of the GDP target.

The credit growth rate of each credit institution and the whole credit system should be strictly controlled in line with the process of the restructuring of credit institutions and the settlement of non-performing loans in accordance with the Prime Minister decision on restructuring the credit institution in the 2016-2020 period.

The credit growth rate of each credit institution must be aligned with its financial capacity and its ability in order to control risks, ensure credit quality and prevent non-performing loans.
It is necessary and important to increase the size of banking credit to achieve the target of GDP growth; however, it is even more important to ensure the efficient use of credit. Only when credit quality and efficiency are ensured can the goals of economic growth and macroeconomic stability be attained.