Credit surge masks concern over capital efficiency

As credit headroom narrows, the priority is building a deeper and more efficient financial system that channels credit into productive sectors and sustainable growth.

- By Ha Truc

The State Bank of Vietnam (SBV) said that as of mid-May, total outstanding credit in the economy had reached approximately $776 billion, up 18.3 per cent on-year. Meanwhile, total deposits stood at around $720 billion, rising nearly 14.9 per cent.

Outstanding loans to the agriculture and rural development sector reached approximately $172 billion, accounting for 22.2 per cent of total system credit, while lending to small and medium-sized enterprises totalled nearly $152 billion, equivalent to around 20 per cent of total outstanding loans.

However, behind the strong credit expansion lies a larger concern surrounding the quality and efficiency of capital flows within the economy.

If capital continues to flow disproportionately into asset markets rather than productive sectors over an extended period, the economy could face rising risks of unsustainable growth, asset-price inflation, and widening wealth inequality.

According to economic expert Dr. Nguyen Tri Hieu, total credit growth reached around 18 per cent in the first five months of the year, pushing total outstanding loans to $776 billion, while deposits rose only about 15 per cent to roughly $720 billion.