Speaking at the meeting of the Party Central Committee's Economic Commission in Hanoi on October 7, Deputy Governor Nguyen Thi Hong of the State Bank of Vietnam (SBV) said that it is very challenging for the SBV to manage the monetary policies in line with the set objective of obtaining the interest rate higher than inflation by 2-3%.
SBV Deputy Governor Nguyen Thi Hong said that, right from the beginning of 2016, the SBV set the objective of credit growth of 18-20%. She updated statistics by September, 2016, credit growth was at 11.74% (credit growth increased by 11% for 9 first months of 2015).
Due to the fact that credit growth often increases more highly in the last quarter of the year than that of the first period of the year, the SBV Deputy Governor stated that credit growth of the whole year may reach the objective level of 18-20%.
Commenting on the opinion that current credit growth is at high level and it should be at 15-16% for 2016, Deputy Governor Nguyen Thi Hong said that for Vietnam’s economy, the capital market is still weak, the funds to the economy are mainly dependent to the capital from commercial banks. Therefore, she emphasized that if the SBV adjusts credit growth level to 15-16%, many enterprises could be short of capital. The Deputy Governor affirmed that “it is very important fact that, during 2016, the disbursement from public investment remains very slow, bank credit continues to be a major channel of capital for the economy”.
The SBV Deputy Governor also asserted the SBV has strictly instructed and managed credit in the direction of credit extension closely collaborated with the safety and the efficiency. Accordingly, right from the beginning of the year, the SBV Governor issued Directive No. 01 and by May, 2016, issuing Directive No.04 and requiring credit institutions to enhance the management of credit risks of lending real estate and medium and long-term loans for BOT and BT projects.
As a result, although credit for real estate still increased, the rate of increase was slower than that of 2015. Specifically, by August 31, 2016, credit for real estate rose by 6.73% which was slower than the level of 13.06% of the same period of 2015. The SBV Deputy Governor said that the developments and the trend have been in line with the SBV Governor’s instruction.
Regarding to inflation and money supply, SBV Deputy Governor Nguyen Thi Hong said that the SBV recognized the inflation was raising. By September, 2016, the CPI increased by 3.4% as compared to that of 2015. It showed the activeness of the Government when adjusting price of goods, healthcare services and education in 2016. For the inflation, it increased by 1.58% in comparison with that of end 2015, by 1.85% as compared to that of the same previous period, and ranging within 1.5% to 1.9% as it was in the previous months.
Regarding to NPL resolution, SBV Deputy Governor Nguyen Thi Hong updated the statistics by August, 2016, it was at 2.66%, lower than the objective level of 3% set in the end of 2015.
Notably, in the first 8 months of 2016, NPLs equivalent to VND58.8 trillion were resolved mainly through collecting debts from customers. It reflected the positive signs of the economy with the improving capability of the customers to pay their debts. At the same time, risk provisioning was effectively utilized to resolve NPLs and sell assets to recover debts.
Moreover, from the beginning of the year to now, the VAMC only purchased NPLs equivalent to VND 16 trillion, which was lower than the same previous year. It showed the fact that most of credit institutions were able to maintain NPL level of below 3%.
“The issue is now the resolution of NPLs purchased by the VAMC”, SBV Deputy Governor Nguyen Thi Hong shared her thought, and said that in fact, the SBV continued to resolve those NPLs but facing many difficulties in legal regulations and obstacles of handling mortgaged assets…
She added that the SBV is continuing to research and put that content in Scheme on restructuring credit institutions in collaboration with NPL resolution for 2016-2020 period to submit to the authority.
Regarding to draft scheme on restructuring the economy for 2016-2020 period referring to the objective of declining the average lending interest rate to the appropriate level that could be higher than inflation by 2-3%, and it should be really competitive with the average lending rate in the regional countries, Deputy Governor Nguyen Thi Hong said that the SBV send documents related to this issue to the Ministry of Planning and Investment. Accordingly, monetary policy is short term policy and dependent on economic situations in the international and domestic markets to appropriately adjust. Therefore, it is really challenging for SBV’s management if setting such objective. Besides, the lending rate is often calculated on the basis of mobilizing rate adding to operational cost of financial intermediaries.
In short, the SBV Deputy Governor said that the monetary policy management will be in collaboration with socio-economic situation in the international and domestic markets to appropriately manage and proactively monitor the inflation.
Le Hang