Bad debts in Vietnam's troubled banking system could fall sharply by year-end to 2.5 to 2.7 percent of total loans thanks to debt restructuring and tighter supervision, Prime Minister Nguyen Tan Dung said on Wednesday.
Toxic debt eased to 3.88 percent of bank loans in September from 3.9 percent in the previous month, compared with 17 percent in September 2012, Dung told the National Assembly in a televised session, citing banks' reports.
Dung's government has been battling with high levels of non-performing loans that have hurt the property market and stifled efforts to boost private sector businesses and stimulate credit growth.
The State Bank of Vietnam, the central bank, projected bad debts would amount to between 3.7 percent and 4.2 percent of total loans at year end, as it "supervised and reassessed more tightly the debt classification," Dung said.
The Vietnam Asset Management Co (VAMC), the central bank-run firm formed to deal with bad loans, has resolved 4 trillion dong ($187.97 million) worth of bad debt, or 4 percent of the 95 trillion dong of debt it has bought from banks, Dung said.
"Resolving bad debts in Vietnam faces many difficulties and needs time due to an incomplete legal framework, a lack of state budget and experience," Dung said.
The government aims to trim bad debts to around 3 percent by the end of 2015.
Dung also said Vietnam's annual inflation would likely to stay under 3 percent, the lowest since 2003 based on government data.
The annual credit growth in 2014 may surpass 12 percent, up sharply from a sluggish 4.5 percent rise in August, Dung said.
Fitch Ratings and Moody's Investors Service have raised Vietnam's sovereign ratings, citing improvements in the economy and stronger position in its balance of payments.
But independent economists still cast doubts on Vietnam's economic performance and reported levels of bad debts.
"The figure (given by the prime minister) does not reflect a real picture of bad debt ratio right now," said Do Thien Anh Tuan, a lecturer and research associate with Fulbright Economics Teaching Program.
"VAMC's bad-debt solving regime basically moves bad debts from banks' balance sheets to its own."