Vietnam Central Bank Lowers Credit Growth Target to 15%

Vietnam’s central bank has officially reduced its credit growth target for 2024 to approximately 15 percent, following concerns about potential financial risks stemming from last year’s credit surge. This adjustment was announced in a statement dated January 10, 2024, marking a significant shift from the prior year, which saw rapid credit growth of around 20 percent as authorities aimed to stimulate economic expansion.

The State Bank of Vietnam articulated that the new target serves as both a guideline and a limit for lenders. This revision comes after economists raised alarms over the risk of asset bubbles, particularly within the real estate sector, which has been a focal point of concern. The previous target set for 2025 was 16 percent, which had already been adjusted upward during the previous year.

Willie Tanioto, a representative from Fitch Ratings, commented on the central bank’s decision, suggesting that the State Bank of Vietnam is attempting to respond to market feedback. He indicated that the target may be modified again later this year or potentially abandoned if circumstances change. The central bank has also advised financial institutions to implement stricter controls on lending activities, particularly in sectors deemed risky, such as real estate.

Market Reaction to Adjusted Credit Growth Target

The announcement regarding the credit growth target led to notable reactions in the stock market. Shares of several real estate companies experienced declines, particularly following speculation about changes to the central bank’s lending policies. For instance, shares of Vinhomes, Vietnam’s largest property firm, fell by 6.4 percent on the morning of the announcement, contributing to an overall drop of approximately 5 percent in Vietnam’s real estate sector.

This decline underscores the sensitivity of the market to regulatory changes and highlights the ongoing concerns surrounding financial stability and asset prices in Vietnam. The central bank’s actions reflect a careful balancing act as it seeks to foster economic growth while mitigating the risks associated with unchecked credit expansion.

As the year progresses, stakeholders will be closely monitoring both the central bank’s policy adjustments and the broader economic landscape to gauge the long-term implications of this revised credit growth target.