Credit for property and high-tech industries prompted a surge in lending by Vietnam's banks during September, making the country's annual target of 12-14 percent "absolutely reachable", according to the central bank governor.
Loan growth since the end of 2013 rose sharply from a sluggish 4.5 percent at the end of August to 7 percent at present, State Bank of Vietnam (SBV) Governor Nguyen Van Binh told a parliamentary committee late on Monday.
Lending was slow due mainly to state debt, troubles in processing assets used as collateral and failure to properly promote a scheme aimed at helping businesses secure loans, Binh said, according to the SBV's website (www.sbv.gov.vn).
The SBV wants to increase lending to stimulate an economy propped up by manufacturing and exports, but constrained by unresolved bad debt and weak consumer demand. Bankruptcies remain rife and many Vietnamese do not qualify for loans or are put off by prohibitively high interest rates.
Vietnam's economic growth quickened in the third quarter ending September to an annual increase of 6.19 percent, the fastest pace since the fourth quarter of 2010, the government said on Friday..
It estimated an expansion of 5.62 percent in the first nine months of 2014, up from 5.14 percent in the same period last year.
State Bank of Vietnam (SBV) Governor Nguyen Van Binh.
Credit growth for high-tech enterprises and property, at 13 percent and 10 percent respectively, has outperformed other sectors, Binh added.
Weak credit growth has prompted banks to boost investment in government bonds, which grew nearly 22 percent from last year by the end of August, the governor said.
Vietnam's bonds have reached record prices in the second and third quarters, driving down the yield on the one-year bond to 4.25 percent, or a fall of around 15 percent since late May.
J.P. Morgan predicted economic stability for Vietnam this year, supported by external demand in the manufacturing sector and better retail spending, with loan growth expected to rise sharply in the final quarter.
"Year-to-date credit growth is running well below the official 12-14 percent target, though in past years has accelerated significantly into year-end," it said in a client note on Monday.
"We expect this trend to repeat this year, supporting growth momentum into year-end."