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Vietnam Growth Below Target

Vietnam Growth Below TargetVietnam Growth Below Target

Vietnam’s gross domestic product increased 5.4 percent in the nine months through September from a year earlier, according to the median estimate in a Bloomberg survey. The government’s full-year target is 5.8 percent for a seventh year of growth below 7 percent, the longest such stretch according to International Monetary Fund records going back to the 1980s.

In recent years, manufacturers including Samsung Electronics Co., LG Electronics Inc., Nokia Oyj and Intel Corp. have set up operations in Vietnam as they looked for options to China. Disbursed foreign investment rose 3.2 percent in the nine months through September, with South Korea, Hong Kong and Japan the top investors in the country.

Even as foreign investment climbed, Vietnam’s credit growth has lagged, rising 5.82 percent as of end-August, compared to 6.44 percent in the same period last year. The government’s target this year is 12 percent to 14 percent, and Prime Minister Nguyen Tan Dung has repeatedly asked the monetary authority to get banks to lend more and at lower rates.

A lack of trust between businesses and banks contributed to slow credit growth, Governor Nguyen Van Binh said last week. The central bank plans to introduce a pilot for unsecured loans for some firms to spur lending, Thanh Nien newspaper reported.

The ratio of bad debt at banks rose to 4.17 percent as of end-June, according to the monetary authority. It may be “substantially higher” because of a lack of consistent classifications and reporting standards for banks, Standard & Poor’s said in a report July 15. Moody’s Investors Service earlier this year estimated it to be at least 15 percent.

 Forecasts Cut

The Asian Development Bank today cut its forecast for Vietnam’s GDP growth this year to 5.5 percent from an earlier estimate of 5.6 percent. It lowered its estimate for next year to 5.7 percent from 5.8 percent.

The Vietnam asset management company has bought more than 58 trillion dong ($2.7b) of bad debt as of end-August, according to VAMC Chairman Nguyen Quoc Hung. The slow pace of purchases and the lack of a schedule for sale and allowing foreign investors to participate remains a concern and is limiting credit growth, Pham said.

While slow lending growth has hurt domestic demand, overseas sales have been a bright spot, rising 15 percent last year and forecast to climb 11 percent in 2014. The outlook for some exporters like Hien, the apparel maker, is weaker.

 

Financialtribune.com