In response to rising concerns that credit is increasingly flowing into the real estate and stock markets, Nguyen Thi Hong, Governor of the State Bank of Vietnam (SBV), provided an in-depth analysis to clarify key issues.

At the regular monthly Government meeting held online on August 7 with provincial and municipal leaders, chaired by Prime Minister Pham Minh Chinh, Governor Nguyen Thi Hong noted that credit across the banking system grew by approximately 10% in the first seven months of the year compared to the end of 2024 - a significant increase relative to the 6% growth seen in the same period last year.

Addressing concerns over capital flowing heavily into real estate and securities, Governor Hong acknowledged that credit growth in these sectors is indeed above the overall average. However, she explained this aligns with policy directions aimed at resolving difficulties in the real estate market. When legal bottlenecks are removed, capital demand for project implementation naturally follows.

In the stock market, although growth is rapid, outstanding loans account for just 1.5% of total credit, posing no systemic risk. The SBV affirmed it continues to closely monitor safety indicators. Currently, the ratio of short-term capital used for medium- and long-term loans remains below the 30% threshold. The central bank also consistently requires credit institutions to align capital flows with loan maturities to ensure system-wide safety.

Regarding the exchange rate, Governor Hong noted that it is under considerable pressure due to both economic and market sentiment factors. As of now, the VND/USD exchange rate has increased by 2.9% compared to the end of 2024. In this context, the SBV is considering halting further interest rate cuts to avoid destabilizing the exchange rate and, in turn, macroeconomic stability.

“We will continue to closely monitor developments and set priorities according to each period, aiming for the overarching goal of macroeconomic stability and sustainable economic growth,” Governor Hong emphasized.

Domestically, Vietnam’s economy continues to register robust growth compared to the region and globally. According to the Governor, average inflation remains under control at 3.6%, within the National Assembly’s target range of 4.5% to 5%.

However, she cautioned that inflationary pressures are rising. Factors such as adjustments in electricity prices, healthcare service fees, and housing rents are contributing to increased input costs, which in turn are pushing up core inflation in recent months. Core inflation, which reflects the long-term effects of monetary policy, is a critical indicator that policymakers cannot ignore.

“When inflation hits, it comes fast, but curbing it takes a long time. That’s why we must manage policies proactively, closely track developments, and remain cautious,” she stated.

The Governor affirmed that during the first seven months of 2025, the SBV managed monetary policy proactively and flexibly, keeping pace with real-world developments. Liquidity measures were implemented to support both growth and inflation control.

Monetary indicators also saw marked improvements. Total money supply rose by 7.5% compared to the end of 2024 - nearly double the increase seen during the same period last year. This surge was largely attributed to the SBV’s restructuring plans, especially the provision of special loans to facilitate the transfer of banks subject to mandatory acquisition.

Additionally, the SBV utilized open market operations to inject short-term liquidity into the banking system, supporting credit expansion while keeping interest rates stable. This approach is vital as the government seeks to stabilize interest rates to support business operations, despite growing credit levels.

For the long term, the Governor stressed the need for comprehensive measures to enhance the effectiveness of monetary policy. Two key proposals stand out.

First, the capital market must be further developed to meet medium- and long-term funding needs, thereby reducing pressure on banks’ short-term capital. This direction has already been endorsed by the government in its most recent directive.

Second, the credit guarantee program for small and medium-sized enterprises (SMEs) should be expanded. With guaranteed access to loans, these businesses could stimulate production across all sectors of the economy.

Moreover, for sectors like real estate and infrastructure - which require substantial long-term capital - funding should be sourced through corporate bonds, municipal bonds, or international loans.

“Only by channeling capital through the right instruments for the right purposes can we achieve both high growth and sustainable stability,” said Governor Nguyen Thi Hong.

Hanh Nguyen