CREDIT FLOWS INTO MANUFACTURING SECTOR

In 2011-2015, gross domestic product (GDP) growth averaged out at 5.91% a year. Therefore, loans should grow 31.3% a year if that GDP growth rate is maintained. This means total outstanding loans should have reached VND8,900 trillion by end-2015.

In reality, loan growth in the five-year period stood at an average 13.5% a year but total outstanding loans totaled only VND4,600 trillion as of the end of 2015.

This indicates the quality of credit growth has improved as less capital was needed to fuel economic growth.

Cao Sy Kiem, former SBV governor, said capital contributes 80% of growth in Vietnam and cheap labor the remaining proportion. Therefore, to maintain high GDP growth, credit growth should be at a high level.

For instance, to achieve GDP growth of 1%, credit should grow 2-3%. The country has set a GDP growth target of 6.7% for this year, so bank credit should grow 18-20%.

Kiem noted many targets have been set for monetary policy, from fueling economic growth to controlling inflation and stabilizing macroeconomic conditions.

Source: The Saigon Times