(Bloomberg) -- Vietnam’s credit expansion in the first half of 2024 almost doubled from a year ago as economic recovery accelerates, although still way below the central bank’s goal.
Annual credit growth was about 6% in the first half, State Bank of Vietnam Deputy Governor Dao Minh Tu said in a briefing in Hanoi on Tuesday. That compares with a 3.13% growth reported by the General Statistics Office a year ago.
With the pace of loan growth slower than the 15% targeted by the central bank this year, the authority said it will continue to request banks to trim operational costs to reduce commercial lending interest rates.
The authority at the same time flagged the risk of rising bad loans as households and companies are struggling. In the first half of the year, non-performing loans rose to 5% of total lending, Tu said. The regulator aims to bring down the bad debt ratio to 3% by the end of 2025.
The trend of quickening credit growth will keep the central bank on watch for any demand-driven surge in inflation, which is already testing the upper end of the 4%-4.5% range targeted by the government this year. Those price pressures coincide with the Southeast Asian economy’s faster than expected growth, with the June quarter economic growth coming in at 6.93%.
The SBV will step up measures on the foreign exchange front if needed, Tu said, without providing details.
The monetary authority last month said it extended payment deadlines for some loans until the end of this year to help businesses amid slow credit growth, the state-owned Vietnam Television reported on its website, citing the regulator.
The central bank, which aims to balance growth and inflation, said in a statement Tuesday that it will also be flexible in exchange rate management in order to stabilize the money market, and help maintain macroeconomic stability and inflation control.
--With assistance from Cecilia Yap.
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