### Vietnam’s Ambitious Financial Proposal
In a bold move to stimulate growth, the State Bank of Vietnam (SBV) has outlined a significant plan to inject VNĐ2.5 quadrillion (approximately US$78 billion) into the economy this year. This ambitious injection is aimed at achieving the government’s target of an 8% GDP growth rate, increasing the credit growth target from 15% in the previous year to a robust 16%. This strategy reflects an assertive approach to invigorate Vietnam’s economic landscape.
### High Liquidity Investment Channels
Investment channels characterized by high liquidity are predicted to reap substantial benefits from this influx of capital. Trần Ngọc Báu, the general director at WiGroup, emphasized that within a short timeframe—approximately three years—various investment avenues will see positive impacts. However, channels boasting higher liquidity, including government bonds, foreign currencies, stocks, corporate bonds, and real estate, are expected to experience these benefits more rapidly and significantly. This trend indicates a potential shift where investors may gravitate towards more fluid assets as confidence in the economy rises.
### The Gold Dilemma
Conversely, the outlook for gold as an investment remains cautious. Due to its close ties to international markets and price control mechanisms, gold investments are anticipated to remain less influenced by Vietnam’s monetary injections. As the domestic economy pivots towards boosting liquidity, gold’s global connections could shield it from localized economic shifts. However, this doesn’t negate the need for investment diversification among Vietnamese investors.
### The Risks of Credit Expansion
While the aggressive monetary infusion presents opportunities, Báu also cautions against the associated risks. The surge in credit expansion carries the potential for heightened inflation, asset bubbles, and a rise in bad debts if the additional funds do not effectively flow into productive sectors. This raises valid concerns regarding the banking sector’s overall health, considering the delicate balance required to maintain capital adequacy ratios and manage the risk of bad debts.
### Rising Pressure on Financial Stability
Báu highlights that rapid credit growth can exacerbate pressures related to liquidity and capital safety. As credit expands, there are genuine worries that the capital adequacy ratio (CAR) might decline, which, in turn, could increase the risk of non-performing loans. Furthermore, this kind of aggressive monetary policy can lead to inflationary pressures that strain exchange and interest rates, thereby affecting macroeconomic stability.
### Structural Imbalances in Financing
Another critical issue pertains to the structural dependency of Vietnam’s economy on bank credit. This reliance has stifled the development of alternative capital mobilization channels such as securities and corporate bond markets. It has been noted that while the bond market is slowly recuperating, the stock market is facing stagnation, with limited large-scale transactions over the past five years. This structural imbalance raises alarms about the health and dynamism of Vietnam’s capital markets, necessitating urgent reforms and revitalization of these channels.
### Quality of Asset and Bank Stability Concerns
Experts are also voicing concerns regarding the increasing pace of bank loans, fearing it could intensify pressure on asset quality. Recent data from the SBV indicates that bad debts of commercial banks reached over VNĐ733.9 trillion (US$29 million) by the end of 2024, reflecting a 3.4% increase compared to the previous year. This trend underscores the pressing need for targeted capital distribution, directing funds explicitly toward real production and business sectors to mitigate risks associated with credit expansion.
### Mobilizing Foreign Capital
To counter the challenges posed by domestic credit reliance, the government is encouraged to enhance its efforts in attracting foreign capital, encompassing foreign direct investment (FDI) and foreign indirect investment (FII). In light of relatively low domestic interest rates, FDI can serve as a crucial support mechanism. By clearing existing bottlenecks and creating a conducive environment for foreign investments, Vietnam’s potential to capture these influxes becomes markedly clear.
### Expanding Financial Services
Finally, to foster a more robust financial ecosystem, there emerges a need for a refined legal framework that facilitates financial companies and fintech firms. These entities could play pivotal roles in filling the capital gaps that commercial banks have yet to address effectively, thereby supporting a more versatile and resilient financial infrastructure.
This ongoing financial transformation in Vietnam represents a crucial chapter in its economic development narrative, as stakeholders seek to navigate the complexities of growth, stability, and sustainability in an ever-evolving landscape.