Skyrocketing Credit Growth Forecast Sparks Inflation Concerns: 15-Year High Predicted

Why is Credit Surging?

According to the State Bank of Vietnam, as of September 29, the total outstanding debt in the economy reached approximately VND 17.7 trillion, marking a 13.37% increase compared to the end of last year. This figure is 4% higher than the same period in 2024. Notably, 78% of this debt is allocated to the production and business sectors.

One of the key drivers behind the positive growth in credit has been the low-interest rate environment, which has stimulated borrowing demand. Additionally, increased public investment and the gradual resolution of legal issues in the real estate sector have contributed to its recovery.

The State Bank of Vietnam has set a credit growth target of around 16% for this year, aiming to support the government’s GDP growth goal of over 8%.

Mr. Phạm Chí Quang, Director of the Monetary Policy Department at the State Bank of Vietnam, stated that earlier this year, the bank allocated the entire credit growth quota to commercial banks and publicly outlined the principles for its implementation. By the end of July, this quota was adjusted to meet the economy’s increased capital demand.

According to Mr. Quang, the additional credit limit was proactively set by the State Bank, without requests from credit institutions. The bank has instructed lenders to ensure safe lending practices, directing capital toward priority production and business sectors.

“We continue to closely monitor capital allocation to ensure funds flow into production and business activities, while restricting disbursements in high-risk areas like real estate,” he added.

Credit Growth to Hit 15-Year High

Mr. Quang further noted that with the current credit growth rate, if banks maintain healthy and sustainable capital mobilization until year-end, overall credit growth could reach 19-20%. This would be the highest growth rate in the past 15 years.

Addressing inflation concerns, Mr. Quang emphasized that the State Bank’s continuous capital supply to the economy does not imply complacency in inflation control. The bank will regularly review policies to balance economic growth with inflation management.

Regarding bad debt risks, the Director of the Monetary Policy Department stated that the State Bank will continuously monitor and instruct credit institutions to exercise caution with loans in high-risk sectors, preventing new bad debt accumulation.

In practice, the State Bank has consistently issued directives requiring credit institutions to ensure safe and effective credit growth, prioritizing the production and business sectors.

In a recent directive, Deputy Governor of the State Bank Phạm Thanh Hà stressed that credit growth must be safe and effective, focusing on production, business, priority sectors, and economic growth drivers. Tight control over credit in high-risk areas is also mandated.

The State Bank is gradually strengthening the safety foundation of the banking system by improving the legal framework. A key development is Circular 14/2025, effective from September 15, which sets capital adequacy standards for commercial banks and foreign bank branches.

This regulation outlines methods for calculating credit risk-weighted assets using standard and internal rating approaches. It also directs credit toward priority areas such as production, small and medium-sized enterprises, agriculture, and social housing, while tightening speculative real estate lending.

Experts believe that the implementation of Circular 14 will enhance banks’ risk management capabilities, steering credit toward safer and more sustainable channels. This long-term foundation will ensure rapid credit growth while maintaining stability and health across the entire banking system.