Credit growth too much for Vietnam's economy: report

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Vietnam's economy may not be able to utilize all the credit doled out by its banking system, which is now equivalent to 1.2 times the country's gross domestic product, a local newspaper said on Thursday.

"The amount is too large for the economy's capacity to absorb it," central bank Governor Nguyen Van Giau was quoted as saying by the Vietnam Economic Times.

In other countries, loans are equivalent to just 60 percent of the GDP, he said. Vietnam's GDP grew 6.78 percent last year to nearly $105 billion, government statistics showed.

The central bank does not provide a value for outstanding loans but releases credit growth on a monthly basis.

The government has approved a plan to cut annual credit growth to below 20 percent from the 23 percent initially targeted as part of measures to curb inflation.

Lending grew 27.65 percent last year, above the official target of 25 percent, while money supply rose 23 percent. The International Monetary Fund said in December the target of 25 percent was too high.

Annual inflation raced to its highest level in two years in February, with consumer prices jumping 12.31 percent from a year earlier, adding urgency to the government's efforts to stabilize the economy.

If credit growth is cut by 3-4 percentage points, between VND70 trillion and 92 trillion ($3.35 billion to $4.4 billion) could be removed from money supply , Giau was quoted as saying.

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