The banking sector bad debt situation could
be worse than expected.
The
recent 2012 Vietnam economy annual report by the Hanoi National University’s
Vietnam Centre for Economics and Policy Research (VEPR), shows that the entire
banking sector’s bad debts might amount to 14 per cent of total outstanding
loans, six-fold more than the central bank’s regulated 2.3 per cent.
The
report put the system’s bad debts at a minimum 8.25 per cent of total
outstanding loans and a maximum 14 per cent, translating into VND83,127 billion
($3.95 billion) and VND141,100 billion ($6.7 billion), respectively.
“Lending
to securities and property climbed to VND108,760 billion ($5.17 billion) in 2011.
Since these markets were halved in value in the past year, loans to these areas
might turn into bad debts. From a more positive angle, if only half of these
loans were bad debts, these debts came to VND54,760 billion ($2.6 billion),”
said report author Nguyen Duc Thanh.
“What
we have witnessed in 2012 was the inevitable corollary of loosened monetary
policies and open fiscal policies from previous years as well as excessively
tightened fiscal and monetary policies in 2011.
This is
a huge roadblock to on-going banking sector, state-owned enterprise and public
investment restructuring,” Thanh asserted.
But,
Central Institute for Economic Research and Management deputy director Nguyen
Dinh Cung assumed 2012’s economic woes did not stem from Resolution 11/NQ-CP to
curb inflation and ensure macroeconomic stability.
“From
another approach, if Resolution 11 with series of measures to tighten fiscal
and monetary policies was not introduced inflation may have surpassed 18.13 per
cent per year in 2011 and the economy might have fallen into recession and bank
lending rates might not be lower than 2011’s average,” said Cung.
Cung,
however, admitted local banking sector was in a pickle due to state management
agencies’ poor supervision capacity and banks racing to boost deposit and
lending at rates beyond the endurance of the economy.
“The
banking sector and the economy’s current woes did not derive from implementing
Resolution 11’s tightened policies, but handling the resolution had made
weaknesses and shortcomings get exposed more quickly and apparently,” Cung
said.
Manh
Bon | vir.com.vn
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