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Vietnam Lowers Credit Forecast as Business Slump Hurts Demand

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Aug. 17 (Bloomberg) -- The Vietnamese central bank cut the country’s credit forecast as slowing growth hurts loan demand from businesses hobbled with unsold inventory, while lenders struggle with rising bad debt.

Total 2012 lending growth won’t exceed 8 percent to 10 percent, the State Bank of Vietnam said in a statement on its website late yesterday. The estimate is lower than a January government target of 15 percent to 17 percent.

“It will be very difficult for lenders to meet their lending targets” even if government support measures achieve the maximum effect, the central bank said in the statement. Credit increased 1.07 percent in the Jan. 1 to Aug. 8 period, central bank data shows.

Vietnam’s expansion slowed to less than 5 percent in the first half of the year and Deputy Prime Minister Vu Van Ninh has said the country may miss its 6 percent growth target. Stagnant lending may undermine efforts to rejuvenate the economy by policy makers, who have cut interest rates and allowed some commercial lenders to ramp up their credit growth to as much as 30 percent this year.

“Slow lending shows that it will be very difficult for the economy to speed up, and banks’ profit will be hurt,” Vo Tri Thanh, an economist and deputy head of the Central Institute for Economic Management, said by phone today. About 80 percent of Vietnamese banks’ earnings come from lending, Thanh said.

To spur lending, the central bank will provide funds to commercial banks that have the potential to make good loans but face difficulties with funding, Nguyen Thi Hong, head of the central bank’s monetary policy department, said in an interview in Hanoi yesterday. Lenders can access funds through daily open-market operations or loans using bonds and bills as collateral, she said.

Inventories in processing and manufacturing industries including beverages, dairy and pharmaceuticals grew 21 percent as of July 1 from a year earlier, according to figures from the General Statistics Office in Hanoi.

To contact Bloomberg News staff for this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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