Vietnam Central Bank Lowers Credit Growth Target to 15%

Vietnam’s central bank has announced a reduction in its credit growth target for the year to around 15%, following concerns about potential financial risks stemming from last year’s credit expansion. The decision, revealed in a statement on January 10, 2024, comes after the country experienced a significant credit growth of approximately 20% in 2023, as authorities aimed to bolster economic development.

The State Bank of Vietnam typically sets these projections as guidelines for lenders, meaning the new target serves as both a goal and a limit. This revised target is lower than the earlier goal of 16% for 2025, which had been adjusted upwards during the previous year. Specific figures for last year’s target were not disclosed.

Reactions to the New Credit Policy

Financial analysts are closely evaluating the central bank’s latest maneuver. Willie Tanioto, a representative from Fitch Ratings, commented on the situation, stating, “In our view, the State Bank of Vietnam has tried to be receptive to market feedback.” He added that the credit growth target might change again later in the year or even be abandoned altogether, depending on market conditions.

In response to rising concerns about asset bubbles, the central bank has instructed lenders to exercise greater caution in extending loans, particularly in high-risk sectors such as real estate. This caution comes amid increasing apprehension over the sustainability of property prices in the country.

Impact on Real Estate Market

The announcement has already had an immediate effect on the stock market. Shares of various real estate companies experienced declines following speculation about the central bank’s adjustment to its lending policy. Vinhomes, recognized as Vietnam’s largest property firm, saw its shares drop by 6.4% on the morning of January 12, contributing to a broader decline in the real estate sector, which fell by approximately 5%.

As the Vietnamese economy navigates these changes, the focus remains on balancing growth with financial stability. The central bank’s actions reflect a cautious approach, aiming to mitigate risks while still fostering economic expansion in the face of potential asset bubbles.