Statistics of the State Bank of Vietnam (SBV) showed that the credit scale by the end of 2018 was about 7,421 trillion dong. In 2019, the credit growth was 14%, equivalent to about 1.040 trillion dong of money that can be injected to the economy, higher than the absolute number of 912 trillion dong recorded in 2018, although the credit growth was still 14%.
According to report of the Ministry of Planning and Investment at the 34th session (May 8th 2019) of the Standing Committee of the National Assembly (NA), as of April 17th 2019, the credit for the economy increased by 3.25 percent (3.74 percent in the same period of last year). Thus, nearly 240 trillion dong were added in the first 3.5 months this year, meaning that the banking sector injected about 68 trillion dong each month.
Based on the above credit room (1,040 trillion dong), about 800 trillion dong can be pumped into the economy in the last eight months of 2019, which means that it is possible to pump an average of 94 trillion dong into the economy in the period, 1.4 times higher than the monthly average of 68 trillion dong recorded in the first 3.5 months of the year.
Experts said that the ratio of credit to Gross Domestic Product (GDP) ratio in Vietnam is high and poses a risk of inflation rising again, although the SBV has so far had five years of successful inflation control and the basic inflation in the first four months this year remained low.
Data from the SBV and the General Statistical Office (GSO) showed that the ratio of credit to GDP was 122 percent in 2016, 130 percent in 2017, and 134 percent in 2018 (equivalent to a credit scale of 7,421 trillion dong and a GDP scale of 5,542 trillion dong).
If the GDP follows the latest updated figures at the 34th session of the NA’s Standing Committee, the government expects the 2019 GDP growth at 6.78%. Accordingly, the GDP scale is forecasted to increase to 5,920 trillion dong.
The 2019 credit growth is expected to be 14%, and the scale of credit will rise to 8,641 trillion dong. Therefore, the ratio of credit to GDP will continue to go up to 142 percent in the end of 2019.
The risk of inflation rising again has been warned from the increase of 8.36 percent in power prices on March 20th, as well as the three adjustments of petrol prices in the first quarter (Q1) of 2019 (on February 15th, March 2nd, and March 18th). In fact, it has directly affected the Consumer Price Index (CPI) in April 2019 which increased by 0.31 percent compared to the previous month. The average CPI in the first four months of 2019 increased by 2.71 percent compared to the same period of 2018, according to the GSO.
Meanwhile, according to the NA’s Resolution, the CPI in 2019 is expected to be controlled below four percent. Nguyen Khac Dinh, Chair of the Law Committee said that the risk of high inflation currently exists due to the increase in the world gasoline prices and also the recent increase of US dollar and gold prices in the last few days. Food prices, according to the general trend in the world, usually set new levels after a few years.
At the 34th session of the NA’s Standing Committee, the NA Chair Nguyen Thi Kim Ngan said that the basic inflation tends to rise steadily, from July 2018 until now, the domestic demand has been creating a significant pressure on inflation.
According to the financial statements in Q1 2019 of 23 commercial joint stock banks, by March 31st, the average credit growth of those banks reached 3.3%, equivalent to an increase of 147 trillion dong. Tien Phong Commercial Joint Stock Bank (TPBank) recorded the highest credit growth rate of up to 9.8%, followed by Orient Commercial Joint Stock Bank (OCB) with 8.5%.
Three banks posted Q1 credit growth of above six percent, including Military Commercial Joint Stock Bank (MB, 6.7%), Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank, 6.5%) and Vietnam International Commercial Joint Stock Bank (VIB, six percent).
Notably, Vietcombank’s credit growth was 6.5%, equivalent to an injection of about 41.155 trillion dong, accounting for 37 percent of the credit growth of the remaining banks, except BIDV’s.
If including BIDV (of which credit growth was 3.6%) and Vietcombank, the total credit injection of these two giants accounted for 52 percent of the total capital injection in Q1 2019 of the 23 mentioned banks. Although Commercial Joint Stock Bank for Industry and Trade (VietinBank) saw a negative credit growth of 0.4%, BIDV and Vietcombank still dominated the credit segment. This shows the huge influence of the leading banks’ credit on the banking market.
Seven banks posted Q1 credit growth from three percent including HCM City Development Commercial Joint Stock Bank (HDBank, 4.7%), Vietnam Prosperity Commercial Joint Stock Bank (VPBank, 4.3%), Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank, 3.8%), Asia Commercial Joint Stock Bank (ACB, three percent), and Viet Capital Commercial Joint Stock Bank (VietCapital Bank, 3.9%).
Except for VietCapital Bank which has small credit scale and BIDV which is in the group of leading banks, banks with credit growth of three percent and more also had fairly large credit scale of 100-200 trillion dong, with total credit increase of nearly 37 trillion dong, accounting for 25 percent of the total credit increase in Q1 2019.
Among five banks recording negative credit growth in the first three months of the year, the credit growth of both VietinBank and Saigon Commercial Joint Stock Bank for Industry and Trade (Saigonbank) was negative 0.4%, and that of Bao Viet Commercial Joint Stock Bank (BaoVietBank), National Citizen Commercial Joint Stock Bank (NCB) and Export Import Commercial Joint Stock Bank (Eximbank) were respectively negative 0.6%, 2.5 percent and 2.9 percent compared to the end of 2018.
VietinBank was one of the four “big banks” posted negative growth in all three indicators compared to the end of 2018, being negative 1.5 percent in total asset growth, negative 0.4 percent in credit growth, and negative 0.15 percent in customer deposit growth.
Thus, in Q1 2019, one bank has nearly used up its credit growth room, which is TPBank with 9.8 percent credit growth.
TPBank’s general director Nguyen Hung said that in 2019, TPBank is allowed to expand credit by 13%. With a fairly high credit growth in Q1, the bank is expecting to expand the credit growth room to 20%.
OCB is also expecting to be granted a credit growth of up to 30 percent in 2019 as its credit increased by up to 8.5 percent in Q1 2019.
Meanwhile, MB’s credit growth plan in 2019 is 15%, and its credit increased by 6.7 percent although MB still expects to expand credit within the SBV’s limit.
The question is whether the SBV will flexible expand credit growth room or not. In 2018, the SBV loosened the credit growth room for some cases, such as MB (from 15 percent to 17%), Vietnam Technological and Commercial Joint Stock Bank (Techcombank, expanded to 20%), and VPBank (from 15 percent to 17%), etc.
This year, with the above pressures, the question is whether inflation is placing burden on the actual credit growth compared to the targets.
This question is noteworthy because in 2018, the SBV initially aimed at a 17 percent credit growth but finally stopped at 14%.
