Economic difficulties are on the shoulders of the banking industry as it has to stabilise the macroeconomy, control inflation, and support economic growth and businesses, experts have said.

At the 2023 Vietnam Banking Forum held on Wednesday, the experts said the banking system still has to mainly provide capital for the whole economy as the country’s capital market is still inadequate. Viet Nam's credit-to-GDP ratio is currently at a very high level. If Viet Nam continues to maintain credit growth at a high level as in previous years, it will be very risky for the country’s banking system and the whole economy.

Nguyen Quoc Hung, General Secretary of the Vietnam Banking Association, said it is currently difficult for the State Bank of Vietnam (SBV) as it has to stabilise the macro-economy and control inflation besides supporting firms and economic growth.

If the current difficulties of the whole economy are put on the banking industry, firms will even face more difficulties next time when banks struggle, Hung warned.

According to Hung, although Circular No 02/2023/TT-NHNN on debt rescheduling and retention of debt categories to assist borrowers has been issued, commercial banks still have to take full responsibility and make their own decisions on debt restructuring. Therefore, commercial banks may have to burden all difficulties of the whole economy.

Ha Thi Kim Nga, senior economist of the International Monetary Fund (IMF)’s Resident Representative Office in Viet Nam, also said the SBV is currently having to navigate a very difficult balance between controlling inflation and avoiding a sharp slowdown in growth, and at the same time dealing with uncertainties related to the real estate market.

Nga recommended the SBV should rely on policy interest rates to control inflation and avoid putting pressure on the exchange rate. At the same time, the SBV should ensure the stability of the financial sector when handling the bottlenecks of the bond and real estate markets.

SBV’s Deputy Governor Pham Thanh Ha said amid a complicated and unpredictable international environment, a small and highly open economy like Viet Nam had to face many difficulties in harmonising contradictory goals.

Ha specified that the challenges were supporting economic recovery while keeping inflation in check, reducing the depreciation of the local currency while keeping interest rates stable, and ensuring the safety of the banking system while providing adequate credit for the economy.

In the first months of 2023, credit growth was very slow, but if credit was loosened, there would be potential risks, Ha noted.

According to Ha, difficulties in the economy include those facing firms and banks. If banks support firms at an acceptable level, the economy will get better. However, if banks support firms by loosening credit granting conditions, and postponing or rescheduling loan payment time, the difficulties will be transferred to the bank.

“The firms’ desire for interest rate cuts is legitimate, and the banking industry also does not want high deposit and lending interest rates. However, we still have to take into account the stability of the macroeconomy and the banking system," Ha said.

At the forum, experts said as the global economy is facing many uncertainties while the domestic economy is riddled with numerous problems, collaboration between ministries, agencies and localities is needed to work out common solutions that can enhance the connectivity between policies and the effectiveness of monetary policy in particular. — VNS