Hanoi (VNS/VNA) - Despite credit growth among Vietnamese creditinstitutions remaining low this year, experts are not concerned about theslowdown, saying it was a good sign for the economy.

Reports from the State Bank of Vietnam (SBV) showed credit growth as of April17 this year had expanded by 3.23 percent against the end of 2018, the lowestrise in the last four years. The rates during the same periods of 2018, 2017and 2016 were 5 percent, 5.2 percent and 4.2 percent, respectively.

Can Van Luc, chief economist of the Bank for Investment and Development ofVietnam (BIDV), said he was not surprised at the moderate credit growth,explaining the SBV had targeted controlling credit growth since the beginningof this year to curb inflation and stabilise the macro-economy.

According to Luc, local firms were no longer too dependent on bank loans asthey could raise capital from the securities and bond markets. The domesticmarket had also witnessed new capital supply channels, such as fintech andpeer-to-peer companies.

As a result Luc said moderate credit growth was a good sign for the economy.

In addition, restructuring of bank loans had improved, he said, explaining thatbank loans were pouring into the production and business sectors, which werekey drivers for the country’s economic growth.

According to the SBV’s Department of Credit for Economic Sectors, despite slowcredit growth, bank loans had been issued for the Government’s prioritysectors, of which credit for high-tech enterprises surged by 7.25 percent. Therise for supporting, export, and agriculture and rural sectors hit 3.63 percent,3.5 percent and 4.8 percent, respectively.

According to Nguyen Anh Duong, director of the General Research Departmentunder the Central Institute for Economic Management (CIEM), low credit growthhad reflected the SBV’s move to control loans for high risk sectors and focuson production.

This year, the SBV has a credit growth target of 14 percent for the entirebanking system - the same as last year – and experts believe this to bereasonable.

Nguyen Duc Thanh, director of the Vietnam Institute for Economic and PolicyResearch, said Vietnam’s economic growth often relied heavily on increasedcredit, times have changed. Now, the economy can grow without strong lending,particularly when the supporting industry as well as the services andagricultural sectors are becoming more attractive to foreign investors.

According to Thanh, there was no reason for higher credit growth this year whenthe economy was still gaining without needing more capital.

Expert Dinh Trong Thinh from the Academy of Finance said that credit growthshould be from 12.5-14 percent as businesses would expand operations bymobilising capital from the securities market, instead of needing more bankloans.

Moody’s Investor Services also hailed the moderate credit growth, saying it waspositive for banks' asset quality and capitalisation.

According to Moody’s, tighter credit could lead to rising problem loan ratios,reflecting the seasoning of banks’ loan portfolios. However, lower creditgrowth encouraged banks to focus on borrowers of better quality, which wouldimprove asset quality in the long term.

Moderate credit growth would also lower pressure on capital, especially forState-owned banks, the ratings agency said.

Analysts from Bao Viet Securities Co (BVSC) forecast credit growth would bearound 14 percent for the next few years, lower than the average rate of 18 percentrecorded from 2015-17. – VNS/VNA