A local bank employee serves a customer. Overall credit growth fell from 6.45 per cent at the end of August to 5.83 per cent on September 18. — Photo vietnamnet.vn

HA NOI (Biz Hub) ― Continuing economic difficulties are weighing on national efforts to achieve desired credit growth, say experts.

An unnamed general director of a joint stock bank told Dau tu Chung khoan (Securities Investment) that the general lending situation wasn't satisfactory although loan costs had significantly declined.

This year, deposit interest rates have decreased 2-3 percentage points, and lending rates have been down 3-5 percentage points, according to the State Bank of Viet Nam. Interest rates for existing loans also eased, with the ratio of loans subject to rates of over 13 per cent having dropped by roughly 67 per cent.

Recent central bank reports revealed that overall credit growth fell from 6.45 per cent at the end of August to 5.83 per cent on September 18.

The director said the decline was because the quantity of new loans couldn't compensate for matured ones.

Many small- and medium-sized firms refused to sign new credit contracts, although bank credit staff visited them to offer an interest rate of only 8 per cent per year. Company leaders said they couldn't sell goods and just tried to maintain modest operations.

Few banks dared to risk financing firms which accepted high interests. "There's a distance between increasing bank caution and decreasing business qualifications involved in lending conditions. Loan demand is not so strong as people expect, but I suppose that such credit growth is already good in the current economic situation," the director said.

"The fourth quarter is the beginning of a production and business season, but the actual enterprise situation shows that fewer firms qualify for accessing new loans," the deputy general director of Vietnam International Bank, Le Quang Trung, said at a seminar in Ha Noi last week.

He said that credit growth, despite improvement in the last two quarters, was currently low compared to the 12-per-cent annual target.

Economist Tran Du Lich told the recent Autumn Economic Forum in central Hue City that credit growth was still trapped in a vicious circle, which was involved in the ups and downs of market demand, business inventory, production and bad debt – all were feeling the impacts of continuing global headwinds and domestic difficulties.

Vu Nhu Thang, director of the Ministry of Finance's Institute of Strategy and Policy on Finance, warned that there was a potential risk of macro-economic instability as the State budget was seeing deficits caused by economic stagnancy, business losses and a frozen property market.

"Looking at these conditions, any lower credit growth this month than last month won't be something amazing," banking expert Nguyen Tri Hieu told Dau tu Chung khoan. "The annual target for credit growth of 12 per cent may be unreachable."

In a report newly submitted to the Government, the Ministry of Planning and Investment said national economic reform programmes had initially seen satisfactory results, but the restructuring of fragile banks was still unsolid as bad debt resolution had just begun and the cross-ownership in banks remained difficult to control.

State Bank Governor Nguyen Van Binh said re-organising credit institutions still needed caution to avoid creating even more difficulties for them. ― VNS