Experts said the credit growth target should be lowered to 12-14 percent this year. (Photo: VNA)Hanoi (VNS/VNA) - Authorities needto closely control the rapid increase in Vietnam’s credit-to-GDP gap so asnot to cause high inflation as in the past, experts have warned.
Reports from Saigon Securities Inc (SSI)’sretail research division showed high credit growth has pushed total outstandingloans of credit institutions to 7 quadrillion VND (299.15 billion USD), equalto 130 percent of the country’s GDP against the 100 percent rate at the end of2014.
With the rise, the credit-to-GDP gap hasincreased in the past few years, from negative growth in 2014 to 30 percent in2018 the report noted, adding that the rate is much higher than that of othercountries including Thailand (6.1 percent), Indonesia (6.8 percent), China(12.7 percent) and the Republic of Korea (-2.4 percent).
“The rapid increase in the credit-to-GDP gap isa risk indicator that needs to be controlled so as not to cause inflation as itdid in 2008 and 2010,” SSI analysts said.
The warning was made in the context that the CPIin the first nine months of 2018 increased 3.2 percent compared to end of 2017,the highest increase in recent years.
According to the analysts, the policy ofstabilising exchange rates and curbing domestic inflation needs to beprioritised as it is very difficult to control external factors, such as crudeoil price or US dollar value. Credit growth should be tightened to reduceliquidity pressure, narrow the credit-to-GDP gap and keep inflation at areasonable rate.
Banking expert Pham The Anh said that as Vietnamhas overcome the downturn and is recovering, the country should focus onsustained growth and avoid excessive reliance on credit as before.
According to Anh, the 6.7 percent GDP growthtarget this year has almost been reached so, monetary policy needs to shiftfrom growth support to inflation caution as inflationary pressure is thebiggest risk for the economy in the rest of the year.
The central bank should limit the money supplyto the economy and lower the 17 percent annual credit growth target to 12-14 percentthis year, Anh recommended.
Previously, the International Monetary Fund alsowarned Vietnam’s credit growth was too high, suggesting the country shouldlower the rate from the current 17 percent to below 14 percent to reinforcemacroeconomic stability.-VNS/VNA
VNA
