In the first five months, the total supply was an estimated 5.28 per cent higher than the end of last year. — Photo laisuat

HA NOI (Biz Hub) — Credit growth of Viet Nam's banking system reached 1.31 per cent from January to May 23, which is creating doubts about the feasibility of 12-14 per cent credit growth by the year-end.

Head of the State Bank of Viet Nam (SBV) ‘s Monetary Policy Department Nguyen Thi Hong announced at the monthly press meeting on Wednesday that: "This situation is partially due to seasonal factors. Credit demand in the first half of the year is normally low."

Hong stated that as the system had an abundant capital source, coupled with lower borrowing costs, credit demand will surge in the latter part of the year.

"The entire target of credit growth [12-14 per cent] will be probably achieved," she added.

In the first five months, the total supply was an estimated 5.28 per cent higher than the end of last year. Meanwhile, the total mobilised capital increased by 4.2 per cent. In May, borrowing costs were trimmed by 0.5 percentage point while deposit interest rates were lowered by 0.5-1.5 percentage points against 2013. Loans for privileged sectors enjoyed 1 per cent cut interest rate.

Responding to questions about the possibility of a lower interest rate towards the year-end, Hong stated that it should depend on the actual movements of the economy and inflation. If inflation continues its downtrend, lenders may cut additional 0.5 percentage point.

Chief Inspector of the SBV Nguyen Huu Nghia stated that in the first five months, Viet Nam Assets Management Company (VAMC) had bought additional VND6.3 trillion (US$ 298.58 million) that raised the total purchased debts to VND45.63 trillion ($2.16 billion).

Earlier this year, VAMC had planned to buy VND10 trillion ($474 million) in the first quarter. Nghia pointed out that this was because of slow policymaking procedures, allowing VAMC to issue special bonds.

To date, credit institutions have submitted applications to sell over VND30 trillion ($1.42 billion) to VAMC. VAMC is planning to raise the total purchased debts to VND70-100 trillion ($3.32-4.74 billion) by the year end. — VNS