According to Pham Luu Hung, Chief Economist of Saigon Securities Incorporation (SSI), before the COVID-19 pandemic, Vietnam’s GDP grew by nearly 7% per year on average, with much of that growth fuelled by bank lending. Since the pandemic, the economy has gradually recovered, but its dependence on bank credit has deepened.

IMF data show Vietnam’s credit-to-GDP ratio has reached nearly 150% — a very high level compared to other regional economies. This indicates that growth has largely been credit-based rather than driven by productivity and long-term investment, posing risks to financial stability.

Hung warned that continuing to rely on bank lending would heighten systemic risks, pressure inflation and undermine economic stability.

“If the country wants to grow by 8–10%, it has no choice but to shift from the monetary market to the capital market,” he said.

Currently, Vietnam’s total private deposits amount to about 7.7 quadrillion VND (300 billion USD) — a vast pool of domestic capital. If only 5% of that were channelled into stocks, the market could gain an additional 15 billion USD — far exceeding the 1–2 billion USD typically drawn from foreign exchange-traded funds after a market upgrade.

Many financial analysts agree that the driving force for 10% growth by 2026 cannot continue to come from bank lending alone, but must instead be powered by a robust capital market and strong domestic capital flows, underpinned by confidence, transparency and improved capital absorption capacity.

Experts describe credit growth as the old driver, while upgrading the stock market and implementing institutional reforms are seen as the “new driver” for unlocking medium- and long-term funding needed to fuel high economic growth in the coming years.

Bui Hoang Hai, Vice Chairman of the State Securities Commission (SSC), said FTSE Russell’s decision to upgrade Vietnam to emerging market status marked not only a historic milestone, but also a new starting point for national capital market development.

To maximise opportunities from the upgrade, Hai said the SSC and the Ministry of Finance had launched a comprehensive action plan focusing on both supply — through developing more market goods — and demand, by attracting investment capital flows.

On the supply side, a key focus would be on shortening the IPO process. Under the new Decree 254, the time from completing an IPO to listing shares had been reduced from 4–6 months to just 30 days.

The government was also encouraging large-scale foreign-invested enterprises (FDI) to conduct IPOs and list domestically.

“Many large and efficient FDI enterprises have expressed a desire to list on the Vietnamese stock exchange,” Hai said. “Once they do, the market will have higher-quality products, greater liquidity and scale, and stronger appeal to international investors.”

Alongside the stock market, the bond market would be regarded as the second key pillar of the capital market to help boost GDP growth. The SSC was building a legal framework for infrastructure bonds, green bonds and other sustainable financial products to meet Vietnam’s vast infrastructure financing needs, Hai said.

Funds tracking emerging market bond indexes from FTSE, JP Morgan and Bloomberg currently total around 5.6 trillion USD, including allocations to economies similar to Vietnam, such as the Philippines, Thailand and Indonesia. When Vietnam’s national credit rating is upgraded to investment grade — expected within one to two years — international bond capital flows will have a legal basis to move more strongly into the country.

Therefore, beyond stimulus measures or public investment, Vietnam’s future double-digit growth will depend on unlocking the capital market — through stocks and bonds — to help restructure the financial system in a more sustainable, transparent and modern direction./.VNA