Vietnam’s credit growth projected to expand by 16% in 2025

The State Bank of Vietnam (SBV) has set a credit growth target of approximately 16% for 2025, alongside a roadmap to phase out the credit growth quota policy.

The credit growth target for 2025 is higher than the 15% growth rate set for this year. Photo: Viet Linh/The Hanoi Times

The figure was revealed in the SBV’s instruction issued to credit institutions on December 30, outlining the principles for assigning credit growth targets for 2025.

The credit growth limits for each institution will be based on their 2023 performance rankings in accordance with Circular 52, multiplied by a uniform coefficient applied to all banks.

The SBV projects a system-wide credit growth rate to be around 16% in 2025, higher than this year’s target of 15%. The regulator will proactively adjust these targets to enable credit institutions to supply adequate and timely capital to the economy without requiring a formal request.

Moreover, the SBV emphasized the continuation of a roadmap to minimize and ultimately discontinue the allocation of credit growth quotas to individual banks, as stipulated in Resolution 62.

The regulator has required banks to maintain safe and efficient credit growth within regulatory boundaries, consistent with risk management capacity, liquidity conditions, and capital mobilization capabilities. Growth must put operational safety first, and channel credit into productive business sectors, priority areas, and growth-driving industries as per government directives. Credit allocation must be tightly controlled in high-risk sectors.

Additionally, banks are instructed to continue cost reductions, expand the application of information technology, and advance digital transformation. These measures aim to allow reductions in lending interest rates.

As of December 7, credit growth had reached 12.5% year-to-date, an improvement from 9% growth recorded in the same period last year. Total outstanding credit in the economy amounted to approximately VND15.3 quadrillion (US$632 billion). Meanwhile, capital mobilization stood at VND14.8 quadrillion ($611 billion), with a lower growth rate than outstanding credit.

Changing interest rates at BIDV Bank - Hanoi Branch. Photo: Pham Hung/The Hanoi Times

Foreign exchange reserves estimated at $80 billion

In its latest macroeconomic report, Viet Dragon Securities Company (VDSC) estimates that the SBV sold approximately $9.4 billion in 2024, leaving foreign exchange reserves at around $80 billion.

According to VDSC, the US$/VND exchange rate experienced significant volatility during the year, with mounting depreciation pressure on the VND in the second and fourth quarters. Since the start of the year, the central exchange rate appreciated by 1.9% to VND24,320 per US dollar. Meanwhile, the official market rate increased by approximately 4.8% to VND25,430 per US dollar, and the free-market rate climbed by 4.3%, stabilizing around VND 25,840 per US dollar. Despite these fluctuations, the movements remained within the SBV’s permissible range.

To mitigate the pressure on the VND, the SBV intervened by selling foreign exchange during periods when market rates approached the upper limits of the allowed band. The interventions took place in two phases: the first, from April to July, involved the sale of approximately $6.5 billion, while the second, spanning from September to December, was more gradual, with sales totaling $2.8 billion.

For the entire year, the SBV's foreign exchange sales amounted to about $9.4 billion, equivalent to VND235 trillion. In contrast, data from the US Department of the Treasury indicated that Vietnam made net purchases of approximately $3.7 billion in 2023.

VDSC estimates that Vietnam’s foreign exchange reserves at the end of 2024 stand at around $80 billion, equivalent to 2.5 months of imports, down from 3.3 months of imports at the end of the previous year.

The US Department of the Treasury earlier estimated that as of June 2024, Vietnam’s reserves totaled $84.1 billion, equivalent to 19% of GDP. Between July 2023 and June 2024, Vietnam’s net foreign exchange sales amounted to 1.5% of GDP, or approximately $6 billion.

Looking ahead to 2025, Vietcombank Securities (VCBS) forecasts continued challenges for the exchange rate. The US dollar is expected to maintain its strength, which is influenced by labor market resilience and robust service sector performance in the US. The Federal Reserve may delay interest rate cuts for longer than anticipated, supporting a strong US dollar against other currencies. Additionally, geopolitical tensions could drive demand for safe-haven assets, with the US$ remaining a preferred choice.

Despite these challenges, VCBS highlights several positive factors for Vietnam’s FX  market. The global trend of monetary easing, combined with Vietnam’s stable macroeconomic conditions, is likely to attract capital inflows. Furthermore, remittances are expected to remain a bright spot, exceeding $13 billion annually for the past three years. The trade balance is projected to maintain a substantial surplus as major economies recover.

VCBS predicts that the US$ Index is likely to remain elevated, possibly for longer than expected. Consequently, the VND is anticipated to depreciate moderately against the US dollar, with an estimated fluctuation of around 3% for the entirety of 2025.