Credit Management: Ensuring Growth and Inflation Control

Credit management is a delicate balancing act, and a critical one for the State Bank of Vietnam (SBV) in 2025. It involves fostering economic growth while keeping a tight rein on inflation and maintaining macroeconomic stability.

Administrator

18 March, 2025

If credit is not directed towards productive sectors, it may lead to inflationary pressures.

Credit management must strike a delicate balance between fueling economic growth and maintaining price stability. This is a key priority for the State Bank of Vietnam (SBV) in the coming years.

Boosting the Economy

The Vietnamese government has set ambitious growth targets for various industries, sectors, and localities, aiming for an overall economic growth rate of at least 8%. To support this goal, the government is focused on helping businesses access resources, including credit from the banking sector.

According to the SBV’s latest data, early indications for 2025 show positive credit growth compared to the same period last year, following seasonal trends. Credit expansion, along with monetary policy, is seen as a critical driver to achieve the targeted economic growth rate.

SBV Deputy Governor Dao Minh Tu highlighted the State Bank’s goal of achieving a 16% annual credit growth rate in 2025, translating to approximately VND2.5 quadrillion injected into the economy. If the government’s 10% economic growth target is met, credit growth will need to reach 20%, equivalent to around VND3-3.2 quadrillion.

Tu noted that commercial banks have maximized their safety ratios. For every VND10 mobilized, they can lend out VND9, with VND1 reserved for safety. However, many banks are currently lending above this ratio, utilizing their charter capital and refinancing from the SBV. The banking system’s total mobilized capital is VND15.2 quadrillion, while the amount lent to the market stands at VND 15.8 quadrillion.

With total outstanding credit nearing VND16 quadrillion and a gross domestic product (GDP) of VND12 quadrillion, credit amounts to 130% of GDP. Given the expected economic growth rate of over 8% this year, this ratio will further increase. “While challenging, the banking sector is committed to navigating this complex macroeconomic landscape,” Tu asserted.

Credit expansion is vital for economic growth – photo: Duy Minh

Balancing Act

Setting high growth targets comes with the risk of inflation. Recognizing this, the government has proposed to the National Assembly an increase in the average inflation target to 4.5-5% for 2025, higher than recent years. Meanwhile, monetary and credit policy management must not only support growth but also curb inflation and stabilize the Vietnamese dong.

Dr. Vo Tri Thanh, an economist, emphasized that injecting money into the economy can boost growth, but the key is to ensure both rapid and sustainable expansion. Sustainable growth should be underpinned by macroeconomic stability, improved labor productivity, and technological advancements.

Analysts caution that robust credit growth can lead to inflation if it is not channeled into productive sectors. Injecting large sums of money into the economy without directing it towards productive activities could trigger inflation and create challenges for the economy and the banking system.

“Historical precedents have shown that asset bubbles can spiral out of control, leading to a rise in non-performing loans and threatening the stability of Vietnam’s banking system,” warned Dr. Nguyen Tri Hieu, a finance and banking expert. “These are critical considerations when expanding credit.”

Governor of the State Bank of Vietnam, Nguyen Thi Hong, affirmed that the SBV will closely monitor global and domestic economic developments and proactively implement measures to control inflation, maintain macroeconomic stability, stabilize the monetary market and banking operations, and ensure the safety of the banking system. She underscored the critical importance of this task for the sustainable growth of the economy.