18 Nov 2022
Vietnam is contemplating the lifting of the cap on credit growth as the economy faces pressure from soaring interest rates and tightening credit conditions, according to the prime minister.
The plans are aimed at “both ensuring the safety of the banking system and macroeconomic stability while boosting economic growth,” said PM Pham Minh Chinh in a statement published on Friday.
Previously, Vietnam placed a 14% cap on credit growth in 2022. Chinh didn’t specify by how much the cap would be lifted, Reuters reports.
Vietnam’s economy is one of the fastest growing in Asia, bolstered by robust manufacturing and exports. The country’s economic growth is heavily reliant on strong credit growth.
Despite rebounding from the pandemic, Vietnam’s economy has faced significant challenges recently. The weakening global demand and a strengthening Dollar led the central bank to hike its policy rates by 200 basis points combined and allowed the Dong to weaken against the greenback.
The hike in interest rates, together with the government’s move to tighten regulations on corporate bond issuance and restrict their refinancing, has resulted in the economy facing a credit crunch, the Reuters news agency report goes on to say.
Pham Minh Chinh is currently directing the banking and finance sectors to “work out measures to tackle the difficulties and fix inappropriate rules,” the government’s statement issued on Friday continued.