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Outstanding loans increasing sharply, joy or worry?
The total capital pumped into the national economy through credit institutions in April increased by 4.86% over the end of the previous month and by 11.16% over the end of 2008, according to the State Bank of Vietnam. Experts can see a lot of problems in the figures.
Growth should be applauded
By the end of the first quarter of 2009, despite a lot of measures on fighting economic downturns, including tightened monetary policies, outstanding loans had increased by 2.67% only in comparison with the end of 2008. At that moment, economists commented that ‘credit was freezing’.
However, the situation became quite different in April, when the capital pumped into the national economy increased sharply.
An economist said that Vietnam has set a high goal for this year’s credit growth, 21-23%. Meanwhile, as the economy is still facing difficulties, the government has been trying to loosen monetary policies and push up investments.
Experts have warned that if the current credit growth rate is kept for the whole year, the credit growth rate may reach over 30%. The figure may make many people remember the hot credit growth period in 2007 and early 2008.
An expert from the National Finance Supervision Council said that many countries in the world are facing ‘frozen credit’, where banks dare not loan, and businesses do not really want to borrow money. Therefore, the high credit growth rate in Vietnam should be seen as a good sign as it means that banks are fulfilling their function of providing capital for the national economy.
Dr Tran Du Lich, a senior economist and member of the Economics Committee of the National Assembly, also said that if the outstanding loans are below 25%, and the government uses monetary tools effectively, focusing on the government’s plans, the high growth rate will not cause bad impacts.
It’s necessary to control cash flow
However, Lich said it is more important to know where the cash is flowing to.
Lich said that if the money can be used for the right purposes and serve the government’s plans, this would be good for the national economy. However, if not -- i.e. the money serves speculation business, like going to the stock and real estate markets -- this would cause problems for the national economy.
Sharing the same view as Dr Lich, Dr Vu Thanh Tu Anh, Director of the Fulbright Economic Teaching Programme, said that if the money cannot be controlled strictly, it might go anywhere.
“If the money goes to the stock or real estate markets, this will not create any added value for the national economy, and will cause a ‘virtual warming up’ in the markets,” Anh said.
“Meanwhile, the real signs of the warming up of the national economy need to be based on industrial production and consumption values,” he added.
In 2007, some commercial banks tried to push up loaning, while injecting money in risky fields like real estate and stock markets, resulting in the total outstanding loans up by 34% over 2006.
VietNamNet, TBKTVN
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