HÀ NỘI — Việt Nam needs to improve the quality of the capital market to create financial resilience and support the country’s high growth targets.

According to Minister of Finance Nguyễn Văn Thắng, in addition to growth drivers such as exports and consumption, raising capital is the key for Việt Nam to achieve the growth target of 8 per cent this year. The country needs capital of more than VNĐ4 quadrillion (US$160 billion) to meet this goal.

Capital demand is expected to continually increase sharply in the next few years when the Government targets double-digit growth in the 2026-2030 period. A series of major projects expected to be implemented such as the North-South high-speed railway, the nuclear power plant and the Long Thành International Airport expansion.

The World Bank also estimates that to become a high-income country, Việt Nam will need to increase financial mobilisation for long-term projects, especially in the fields of infrastructure and climate change. For infrastructure projects alone, the country needs additional capital estimated to account for 7 per cent of its GDP.

According to State Bank of Vietnam’s Governor Nguyễn Thị Hồng, currently, the country’s capital source for production and business is heavily dependent on credit from the banking system. Việt Nam's outstanding loans per GDP ratio has reached more than 120 per cent of GDP. Therefore, the SBV often has to be very careful about credit management.

International financial institutions such as the World Bank and the International Monetary Fund have also warned about Việt Nam’s dependence on bank credit. According to the institutions, an economy that is too dependent on bank credit can cause major problems on increasing liquidity risks and bad debts. This was clearly seen in the 2022-2023 period when interest rates increased sharply and pushed up borrowing costs that immediately affected production, business activities and the entire economy.

Therefore, experts suggest Việt Nam needs a long-term strategy to develop the capital market to create additional funding channels besides the banking system to support future growth targets. When the capital market develops, dependence on banks will decrease that helps reduce the gap between deposit interest rates and lending interest rates.

As Việt Nam is having the opportunity to upgrade the stock market to an emerging market this year, this will trigger foreign capital flows into the Vietnamese market, contributing to capital support for the economy.

Besides encouraging foreign participation in the capital market, an expansion and diversification of domestic investors is seen as key to helping Việt Nam achieve its goal of a stock market capitalisation of 120 per cent of GDP and a corporate bond outstanding value of 25 per cent of GDP by 2030.

According to HSBC, Việt Nam still has a lot of room to increase the presence of institutional investors in the securities and corporate bond markets. For example, the Việt Nam Social Security Fund (VSS) is estimated to hold assets equivalent to more than 10 per cent of GDP, but the VSS is not yet allowed to invest in domestic stocks and corporate bonds.

According to Dr Nguyễn Hữu Huân from the HCM City University of Economics, the development of the bond market, fintech and international financial centres are important solutions to help Việt Nam diversify capital sources and improve the competitiveness of the financial system. If the solutions are implemented effectively, Việt Nam will have a more balanced financial system, supporting businesses to access capital at reasonable costs and creating a premise for long-term economic growth.

Experts also say that to promote the capital market, there need to be synchronous policies from the Government to create favourable conditions for businesses and investors to confidently participate in the financial market with the highest level of transparency and safety. — BIZHUB/VNS