Economy struggles to cope with bad debt, slow growth

So far this year, the Vietnam Asset Management Company (VAMC) purchased around VND19.6 trillion (US$933 million) in bad debts but has a purchase target of VND70 trillion to VND100 trillion for 2014 alone.— Photo vneconomy

HA NOI (Biz Hub) — The Vietnamese economy is facing three major challenges: low credit growth, slow pace of settlement of non-performing loans and sluggish business and production.

The Government news portal quoted Cao Viet Sinh, former planning and investment deputy minister, as saying that credit growth rose steadily from 3.15 per cent in July to 4.08 percent in August and 6.62 per cent in September 2014, but capital had not been effectively pumped into the economy. "As a result, it is hard to expect strong growth," Sinh added.

Meanwhile, banks' non-performing loans have increased mainly because of low credit growth and slow settlement of bad debts.

For instance, the ratio rose from 3.61 per cent at the end of 2013 to 4.07 percent last May and 4.17 percent in June.

Commenting on the business community, the former deputy minister expressed concern over the number of dissolved and suspended enterprises, which went up by 13.8 per cent year-on-year to 48,330.

Little improvement was likewise seen in the number of newly-established businesses and registered capital volume, Sinh said.

To overcome these challenges, the Government has ordered lower units to seek solutions to facilitate production and business while stepping up implementation of the master plan for economic restructuring.

The General Statistics Office (GSO) has reported that the economy expanded by 5.62 per cent in the first nine months of 2014. The figure, Sinh noted, went beyond expectations.

Specifically, the GDP climbed from 5.09 per cent in the first quarter to 5.42 per cent in the second quarter and 6.19 per cent in the third quarter, said the statistics agency.

The index of industrial production also increased from 5.3 per cent in the first quarter to 6.9 per cent in the second quarter and 7.7 per cent in the third quarter.

Other positive signals include a 3.2-per cent year-on-year increase in foreign direct investment inflow to $8.9 billion and a 10-per cent year-on-year increase in official development assistance to $4.1 billion. — VNS