Why is credit growth showing signs of slowing down?

DNHN - Recently, credit growth has shown signs of slowing down, which has attracted the attention of many economic analysts and policymakers. Several factors have contributed to the slowdown in credit growth.

According to a report by the State Bank of Vietnam (SBV), credit growth increased and reached 6% at the end of June but then decreased to 5.3% by July 17.

Viet Dragon Securities Corporation (VDSC) assessed that the increase in credit during the first two quarters of the year and the slowdown in July 2024 reflects the overall trend of credit growth.

In a recent statement, Associate Professor-Dr. Nguyễn Hữu Huân from the University of Economics Ho Chi Minh City suggested that the economy's capital absorption was slow in the first half of the year and only began to improve by the end of the second quarter of 2024. He explained that seasonal factors in the first quarter, weak market demand, and the unclear recovery of the real estate market were the main reasons. He predicted that credit growth this year could reach 11-12%.

Although the SBV has implemented several programs to support banks and businesses in developing credit, analysts believe that there needs to be an increase in domestic supply to boost credit growth.

Overall, considering the goals, solutions, and forecasts for 2024, as well as the performance results in the first few months of the year, it can be seen that to achieve the 14-15% credit growth target set by the SBV, the banking system will need to make great efforts in the remaining months of 2024. They will need to provide a suitable amount of credit capital to meet production, business, and consumption needs in the second half of the year, while also effectively controlling credit risks.

The State Bank of Vietnam has implemented tight monetary policy to control inflation and maintain economic stability. Measures such as raising the basic interest rate and higher reserve requirements have increased borrowing costs. This has led to businesses and individuals being less inclined to borrow, affecting the rate of credit growth.

The global economic situation is currently facing many uncertainties, including trade tensions, fluctuations in raw material prices, and economic recessions in some regions. These factors have reduced investor and business confidence in economic prospects, causing them to limit borrowing and expansion activities, thereby affecting credit growth in Vietnam.

Recently, financial regulators in Vietnam have increased control and regulation of credit activities to ensure the stability of the financial system. The tightening of credit conditions, especially for high-risk sectors, has reduced many businesses' access to capital, leading to a slowdown in credit growth.

Currently, the demand for loans from businesses and individuals is also trending down. In the context of the economy not fully recovering after the pandemic and many businesses facing difficulties in maintaining operations, the demand for loans for investment and consumption has decreased. This has reduced the amount of credit that financial institutions can provide.

Many domestic businesses are currently facing financial difficulties, reducing their ability to repay debts and making banks more cautious in granting credit. Businesses are struggling to raise capital and maintain operations, which in turn slows down credit growth in the economy.

Therefore, the slowdown in credit growth results from many combined factors, including tight monetary policy, global economic instability, strict financial regulations, reduced borrowing demand, and the financial difficulties of businesses. To improve the situation, there needs to be close coordination between financial policies and timely support for businesses to promote recovery and credit growth.

Nhan Ha