The real estate market has witnessed positive developments, with a slew of projects, including billion-dollar projects, being announced and called for investment in the first quarter of 2024.

This information was revealed at a conference held on April 15 by the Vietnam Association of Realtors (VARS) to announce a report on Vietnam's real estate market in the first quarter, and the forecast for the second quarter.

According to Tran Van Binh, Vice Chairman and General Secretary of VARS, the Vietnamese economy has shown signs of vitality in the last quarter, and likely to maintain a positive growth trajectory. The Government, ministries and sectors have demonstrated high determination in promoting the real estate market, particularly in ensuring the safe and healthy development of the housing segment.

VARS's observations indicated that after a prolonged period of cautious monitoring of market developments, customers and investors are beginning to clearly show their interest in real estate, Binh said.

According to VARS's survey, up to 70% of customers and investors are willing to purchase real estate in 2024 if they find suitable products. Land plots and low-rise properties are the two segments receiving the most attention.

In the first quarter of 2024, a total of 20,541 products were supplied, including 4,300 new products. Notably, a series of billion-dollar real estate projects have simultaneously been commenced, ready to supply abundant sources to the market.

Le Dinh Chung, CEO of SGO Homes, remarked on the supply structure, saying that 1,250 affordable housing units were offered for sale in the first quarter, a growth rate of over 70% compared to the fourth quarter of 2023. Notably, 100% of the supply source came from social housing projects in many localities.

Furthermore, the absorption rate of projects continued to improve, reaching nearly 31%, up 5% compared to the fourth quarter of 2023, and 19% higher than the same period last year.
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According to Pham Thi Mien, Deputy Head of Market Research and Investment Promotion at VARS, the proportion of transactions in the affordable apartment segment is trending downward due to a beginning scarcity in the supply. However, the proportion of transactions in the low-rise segment and land plots has improved compared to the previous period.

Currently, primary selling prices continue to maintain a stable trend, with an increase of about 2-3% compared to the previous quarter. New low-rise projects and land plots are priced quite reasonably.

Nguyen Van Dinh, Vice Chairman of the Vietnam Real Estate Association and Chairman of VARS, emphasised that the real estate market currently possesses sufficient elements ready to serve as a springboard for the recovery process./.

Garment & textile sector tries to keep growth momentum

The Vietnamese garment and textile sector is carrying out various measures to bolster production and business activities amidst formidable challenges posed by falling demand, high inventory, and geopolitical instability in several countries, according to insiders.

Enterprises have received more export orders but seen no improvement in prices while several contracts even plunge 30-50% in value, they said.

Furthermore, cotton prices are expected to soar in the coming time due to speculation and logistics difficulties. In the meantime, it could be hard for Vietnamese firms to compete in the Chinese market where tax incentive and support policies on transport costs and electricity have been rolled out to back up domestic production.

Against this backdrop, General Director of the Vietnam National Textile and Garment Group (Vinatex) Cao Huu Hieu said that firms need to capitalise on all opportunities, make rational forecast, and get updated with the situation so as to take timely measures.

Besides, they should drastically restructure their organisations, apply advanced management solutions, and push ahead projects that help improve productivity, he added.

Vinatex Chairman Le Tien Truong stressed that besides challenges, there is ample room for development for those with sound business strategies, diverse products, deep engagement in supply chain, and rational steps towards digital economy and green economy.

The group will keep a close watch on the market and operation of its members so as to pen flexible and breakthrough measures to develop products and seek new markets to ensure business efficiency, he said.

Meanwhile, Chairman of Hung Yen Garment Corporation Joint Stock Company Nguyen Xuan Duong held that high input cost and workforce transition to such markets as the Republic of Korea and Japan have placed a burden on the company.

Along with global demand falling by 5-10%, large fashion brands teetering on the brink of bankruptcy is another challenge that makes it hard for Vietnamese firms to recover tens of millions of USD, he said.

Duong suggested competent ministries and sectors to issue suitable policies to help enterprises get access to capital to strengthen investment and bolster production, adding workers also need assistance to improve their livelihoods.

During January – March, the garment and textile sector’s export turnover grew nearly 10% year-on-year to some 10 billion USD, a locomotive for enterprises to fulfill the set target of 44 billion USD for the whole year./.

Banks record positive business indicators in Q1 2024

Many banks have reported positive business indicators, especially credit growth, in the first quarter of this year.

SeABank's pre-tax profit in the first quarter of 2024 reached more than 1.5 trillion VND, an increase of nearly 41% over the same period in 2023. The bank’s total operating income also surged by 19.54% to 2.7 trillion VND and its total revenue increased by 4.6% to nearly 6.44 trillion VND. At the same time, SeABank's net non-interest income (NOII) also recorded an impressive growth of nearly 51% over the same period last year to 705 billion VND.

As of March 31 this year, SeABank's total assets were more than 271.6 trillion VND, an increase of 2.06% compared to December 31, 2023.

Chairman of ACB Tran Hung Huy said at the end of the first quarter, credit growth at ACB reached 3.7%, double the growth rate of the whole banking industry and also better than the same period last year. The bank’s raised capital also grew by 2.1%, of which non-term deposits increased by 6.4%.

ACB’s profit was estimated at 4.9 trillion VND, close to the bank’s plans.

Dang Khac Vy, Chairman of VIB, said the bank’s credit growth was about 1% in the first quarter of this year. VIB’s profit reached more than 2.6 trillion VND, equivalent to the same period last year.

Nguyen Dinh Tung, General Director of OCB, said by the end of the first quarter of 2024, OCB's credit growth reached about 4.6% and capital mobilisation increased by about 5%. The bank’s pre-tax profit in the first quarter of 2024 was about 1.2 trillion VND.

In a recent report, MB Securities Company (MBS) forecasts profit of the banking industry will increase by 20% in the first quarter of 2024.

According to experts, the prosperity of the banking industry in the period came from many supporting factors, including favourable policies to credit growth.

Credit of the banking industry as of March 25, 2024 increased by 0.26% compared to the end of 2023 to about 13.6 quadrillion VND, the State Bank of Vietnam (SBV) reported. In March alone, credit rose by 0.98%.

To boost credit growth, the SBV has requested credit institutions to firmly implement effective credit growth solutions since early February. Accordingly, credit institutions must review to simplify lending procedures with an aim to increase people's ability to access capital.

Besides, they must focus on strengthening digital transformation in the credit process to increase access to capital and more widely popularise banking credit activities.

In addition, the SBV said it was necessary to improve the operational efficiency of funds such as the credit insurance fund for small- and medium-sized enterprises (SMEs), and the development fund for SMEs, to enhance SMEs' ability to access credit./.

Canada is second largest consumer of Vietnamese pangasius in CPTPP bloc

Canada has become the second largest consumer of Vietnamese pangasius in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) bloc, accounting for about 20% of total export turnover, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

The first half of March saw Vietnamese pangasius exports to Canada edge up 7% to US$2.3 million against the same period last year, reported VASEP.

Between the beginning of the year and mid-March, Canada imported pangasius products worth more than US$8 million from Vietnam, representing an increase of 43% against last year’s corresponding period. 

Compared to other markets within the CPTPP bloc, Canadian consumers prefer dishes from pangasius fillets, frozen catfish fillets, and frozen pangasius slices.

Along with imports from Vietnam, Canada also purchased pangasius from other markets such as China, Thailand, and Indonesia. At present, the North American country has carried out a range of stringent inspections over imported products.

To further develop the market, VASEP experts have advised processors and exporters to continue improving product quality and strictly abiding by Canada’s standards and regulations.

Moreover, local firms are required to pay close attention to building stable and long-term partnerships with distributors and retailers in Canada, allowing Vietnamese products to reach foreign consumers in the most effective manner possible.

Organic coconut nectar products officially enter Australia for first time

Tra Vinh FARM Co. Ltd. (Sokfarm) in the Mekong Delta province of Tra Vinh has officially exported its first batch of four kinds of organic coconut nectar products to the Australian market.

The shipment comprising of 4,000 bottles and packages was also the first exported by Sokfarm to Australia through an official channel.

According to the schedule, the company will export the second shipment to the market after two weeks.

Sokfarm owns a 20,000-hectar coconut growing area that fully meets international standards. The company is building a new factory, with an expected production capacity of 10 to 12 tonnes of fresh coconut nectar per day.

Tra Vinh is the second largest coconut grower in Vietnam behind only Ben Tre. It is growing nearly seven million coconut palms on over 26,000 hectares of land, with its total annual output reaching 370,000 tonnes.

Vietnamese coconut nectar products have been officially exported to several foreign markets, including Japan, the Netherlands, Germany, and the United States.

Businesses press for EPR guidelines

Enterprises may be forced to deal with rising production costs in an attempt to comply with extended producer responsibility regulations without state support.

The implementation of the Law on Environmental Protection, which includes guidance on extended producer responsibility (EPR), is still waiting to be approved.

According to the Ministry of Natural Resources and Environment (MoNRE), March 31 was the registration deadline for the EPR portal, and April 20 is the deadline for contributions to the Vietnam Environment Protection Fund. Yet, uncertainties remain about the fee calculation, particularly concerning product and packaging recycling costs, making budgeting difficult for businesses.

According to the Japan Chamber of Commerce and Industry in Vietnam (JCCI), outlines for the circular economy and the development of detailed implementation guidance on EPR are required.

“As EPR has been gradually applied since January, it is a concern if the burden of waste recycling costs will be unilaterally imposed only on producers and importers, which will lead to an increase in production costs and thus decrease international competitiveness,” said Muto Shiro, vice chairman of the JCCI, at the Vietnam Business Forum last month.

“We believe that the regulations and detailed implementation guidelines are necessary for companies to fulfil their EPR. We have heard that even high compliance and conscious companies may not know how to respond to comply with the law because, for example, the method of recycling lubricants, the method of calculating recycling results, and the scope of responsibility are unclear.”

Unilever Vietnam chairwoman Nguyen Thi Bich Van said, “EPR should be implemented when the local recycling industry and the market for recycled materials are ready because then it can fulfil its mission of promoting a circular economy. On the contrary, it can create a financial burden for businesses when it takes effect at the wrong time.”

The policy framework should be flexible, encouraging new initiatives and approaches but not limited to initiatives by businesses, social enterprises, or reinvestment of government funds in waste collecting and treatment, Van added.

The business community in various chambers of commerce, as well as domestic producers, expect related policy to have incentive solutions for those using PCR plastic in packaging, creating incentives for businesses to invest in reducing the use and recycling of plastic.

Many producers are also concerned that under this framework, fees charged to producers exceed the recycling system’s capacity, risking higher prices for consumers. As a solution, they propose a two-year, penalty-free gradual EPR implementation period from 2024 to prevent business overload while balancing economic and environmental goals. Additionally, transparency in managing the Vietnam Environment Protection Fund is vital, with open disclosure of allocations for recycling and technological advancements.

Starting from January 1, EPR requires producers and importers of electronic products, lubricants, and various types of packaging must either recycle or pay fees to support waste recycling activities.

Producers and importers of electrical and electronic products shall implement recycling responsibilities from 2025, while producers and importers of vehicles shall implement recycling responsibilities from 2027.

Due to the concerns of producers and importers, the MoNRE has organised training courses. Going forward, a circular will be approved on the management of contributions paid by producers and importers into the environmental protection fund to support waste recycling and treatment.

“In February, the National EPR Council was established, which is a cross-sectoral cooperative organisation assisting the management, supervision, and implementation of EPR for recycling products and packages as well as treating waste,” said Nguyen Thi, senior legal expert at the Department of Legal Affairs under the MoNRE.

“Once the circular is approved, we can use a part of the budget to recruit the official staff, who will support explaining the questions from producers and importers during the process of declaration and implementation of the EPR.”

Vietnam spends nearly US$702.74 million on corn import in Q1

Vietnam imported 2.78 million tonnes of corn worth US$702.74 million during the first quarter this year, reported the General Department of Vietnam Customs.

These figures show an annual increase of 27.1% in volume, but a decrease of 4.8% in value year on year, respectively.

The average price of imported corn stood at US$252.7 per tonne, down 25.1% compared to the same period last year.

In March alone, local businesses spent US$215.88 million on purchasing 871,741 tonnes of corn with an average price of US$247.7 per tonne. The figures were up 13.6% in volume, but down 17.2% and 21.7% against March 2023, respectively.

During the January - March period, Brazil was the largest supplier of corn to the Vietnamese market, reaching 1.49 million tonnes valued at US$381.27 million. It was followed by Argentina with 728,759 tonnes worth US$178.79 million, and Laos with 66,033 tonnes costing US$16.55 million.

The majority of imported corn is used every year to produce animal feed. The rest is directly used for food, food processing, and producing bio-energy.

According to Statista, the statistics portal for market data, Vietnam makes up one of the 30 largest corn growing countries in the world. It is also one of the largest importers of corn in the world, behind only China, Europe, Mexico, Japan, the Republic of Korea, and Egypt.

Downside risks being felt on Vietnam’s growth path

Vietnam is forecast to face massive difficulties in domestic production recovery and external demand, which remain feeble, with lower-than-expected economic growth this year.

Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO) last week published its annual flagship report, which forecasts the ASEAN+3 region to grow at 4.5 per cent this year, up from 4.3 per cent in 2023.

Vietnam is projected to stay in the top three fast-growing economies, with a growth rate of 6 per cent, just after the Philippines (6.3 per cent) and Cambodia (6.2 per cent).

The government has set a target of hitting an economic growth rate of 6.5 per cent this year. The rate touched 5.66 per cent in Q1 of 2024.

“In Vietnam, risks to the growth outlook are tilted towards the downside. The primary downside risk stems from external factors, such as slower-than-expected economic growth in the US, the EU, and China,” AMRO said.

According to AMRO, on the domestic front, developers are grappling with persistent risks of subdued revenue and financial distress. Additionally, there are upside risks to consumer prices arising from extreme weather affecting food production and the depreciation of VND.

“Over the longer term, Vietnam’s growth potential faces a confluence of structural challenges. The country’s high growth is primarily attributable to multinational corporations. However, domestic supply chains need to be built up as part of the manufacturing ecosystem,” AMRO said. “Local micro, small, and medium-sized enterprises have faced difficulties in advancing up the value chain.”

Vietnam’s General Statistics Office reported that 89,100 businesses halted operations last year – up 20.7 per cent compared to the previous year; 65,500 enterprises stopped operations and waited for dissolution procedures – up 28.9 per cent; and 18,000 enterprises completed such procedures. On average, 14,400 enterprises left the market every month.

Q1 of 2024 saw 53,400 businesses with suspended operations – up 24.5 per cent on-year; 15,500 businesses stopped operations waiting for dissolution procedures – up 21.7 per cent; and 5,100 enterprises completed such procedures. On average, nearly 24,700 businesses left the market each month.

The Asian Development Bank (ADB) has also maintained its earlier growth projection for Vietnam this year despite lingering uncertainties in the external environment. Vietnam’s economy is expected to grow at 6 and 6.2 per cent in 2024 and 2025, respectively, according to its outlook for April, released last week.

“Vietnam’s economy is expected to grow at a solid pace this year and the next, despite a challenging global environment,” said ADB country director for Vietnam Shantanu Chakraborty. “However, global geopolitical uncertainties and domestic structural fragilities could impact this. Therefore, policy measures will need to combine short-term growth support measures to strengthen domestic demand with long-term structural remedies to promote sustainable growth.”

The World Bank, in its East Asia and Pacific Economic Update released on April 1, projected that the Vietnamese economy would grow by 5.5 per cent this year, making putting among the top growth leaders in the world. The projection remains unchanged compared to the bank’s prediction of 5.5 per cent in 2024 and 6 per cent released earlier this year.

World Bank East Asia and Pacific chief economist Aaditya Mattoo ascribed Vietnam’s 5.5 per cent growth projection to global trade resilience as well as the country’s post-pandemic recovery resilience.

“The destination of China+1 is Vietnam. Accordingly, Vietnam can pull in huge investment. Therefore, Vietnam should not be satisfied with the GDP growth figure of 5.5 per cent as a country with great growth potential,” Mattoo said.

Global analysts FocusEconomics has also made a forecast that Vietnam will be ASEAN’s fastest-growing large economy in 2024.

“Industrial output and goods exports will benefit from improving global electronics demand, and services activity will be supported by higher visitor arrivals,” FocusEconomics told VIR. “Downside risks include a sharper-than-expected slowdown in key partner China and lower investment by multinationals due to a higher corporate tax rate.”

Their panelists see Vietnam’s GDP expanding 6 per cent in 2024, and 6.4 per cent in 2025.

Nearly 400 businesses to attend HCMC FOODEX 2024

The Ho Chi Minh City International Exhibition of Food and Beverage in 2024 (HCMC FOODEX 2024) is scheduled to take place from May 15 to May 18 in Ho Chi Minh City, with the eent set t attract the participation of nearly 400 local and foreign firms, heard a press conference on April 16.

Upon addressing the event, Tran Phu Lu, director of the Ho Chi Minh City’s Investment and Trade Promotion Center (ITPC), emphasised that the function will contribute to providing support to food production businesses whilst also introducing high-quality Vietnamese products to the global market.

The occasion will also help enterprises to strengthen trade connectivity and develop strategies to apply advanced machinery and technologies into the production process, thereby improving overall competitiveness, product quality, and helping to expand both domestic and export markets.

On display across the 500 stalls at the expo will be products in the categories of raw and deeply-processsed food products, beverage, raw materials used in the food processing industry, machinery and equipment for production, packaging and preservation, as well as green and sustainable products.

The highlight of this year's exhibition will be the business-to-business (B2B) sessions with the goal of connecting food production enterprises with distribution units and modern supermarkets, as well as e-commerce channels and international buyers.

Furthermore, a series of seminars and trade exchange events will be held during the expo to assist firms in updating the latest information on trends in production, consumption, and orientations for potential export markets.

A cooking contest will also be held to introduce Vietnamese agricultural products through culinary culture.

Vietnamese chili exports to China sees upsurge in March

Vietnam exported 1,523 tonnes of chili in March worth US$4.2 million, marking a sharp rise of 72.3% compared to February, with the Chinese market accounting for nearly 88% of the export volume, according to the Vietnam Pepper Association (VPA).

During the three-month period, the country shipped 3,141 tonnes of chili abroad worth US$8.1 million, representing an increase of 17.6% in volume and 52.8% in value against the same period last year.

The average export price surged by 28% year on year to US$2,610 per tonne. China and Laos were the two main consumers at 2,753 tonnes and 259 tonnes, respectively, making up nearly 96% of the total export volume.

The rise in the export price can largely be attributed to the bustling demand for chili consumption that exists in markets such as China and the Republic of Korea.

Last year witnessed Vietnam rake in US$20 million from exporting 10,173 tonnes of chili, a sharp increase of 107% compared to 2022.

Green finance discord to be addressed

Establishing a detailed green classification system and independent evaluation are recognised as key elements for steering Vietnam’s green finance sector in line with international standards.

Pham Thi Thanh Tung, deputy head of the Credit for Economic Sectors Department at the State Bank of Vietnam (SBV), underscored the potential of green finance as a pivotal lever for Vietnam’s ecological transition and net-zero targets during a seminar more than a week ago.

Tung cited robust growth in green credit, reporting an average annual increase of over 22 per cent from 2017 to 2023. By the end of 2023, the issuance of green credit by 47 financial institutions had jumped 24 per cent on-year to approximately $26.2 billion, making up about 4.5 per cent of the total economic debt.

“Investments have been channelled primarily into renewable energy and green agriculture,” Tung said, underscoring the critical role of tailored green credit programmes in business and environmental transitions. “Environmental and social risk assessments have become more robust, with such evaluated loans now constituting over 20 per cent of our economic lending, reflecting a substantial on-year growth.”

Despite the progress, however, the absence of a green classification list is particularly acute.

“The list originally identified only 12 sectors but has failed to evolve alongside the industry changes. In terms of financing substantial projects, there’s a mismatch between the long-term credit issuance and the short-term capital raising prevalent among financial institutions,” Tung explained. “This misalignment forces lending institutions into a tight spot, trying to meet the regulatory standards for short-term capital allocations to medium- and long-term loans.”

Thus, a national green taxonomy, aligned with international norms, is pivotal for precise assessments and prioritising of capital for green projects, she emphasised, suggesting that this would be foundational for aligning credit institutions with Vietnam’s green ambitions.

Discussing the green bond market, Dr. Can Van Luc from BIDV noted its relatively slow growth, predominantly led by major firms such as Masan and Vingroup.

“The market’s development, while more positive in recent years, has been modest with an issuance volume around $1 billion, which is small compared to Vietnam’s financial market needs and potentials for medium- and long-term financing,” Luc said.

Echoing the need for a robust framework, Dr. Nguyen Dinh Tho, director of the Institute of Strategy and Policy on Natural Resources and Environment, advocated for an independent certification system, an approach receiving backing from international entities and the SBV itself.

“The assessment of green projects can be complex. For simplicity and transparency, we propose that local environmental departments should handle smaller-scale projects, with larger, more complex projects managed by units under our ministry,” Tho said.

The alternative, involving direct assessments by financial organisations, brings its own set of challenges.

“It’s vital to avoid any conflicts of interest. An independent organisation would ensure the integrity of green assessments and prevent ‘playing and refereeing the game’ scenarios,” Tho added. “Also, how do we deal with projects that lose their green status post-certification, or worse, those that commit green credit fraud? These are pressing concerns that require robust solutions.”

As Vietnam positions itself in the next generation of free trade agreements, these issues take on even greater significance.

“Building a green classification system to international standards is not just beneficial but crucial for Vietnam’s sustainable and environmental goals,” Tho said.

Meanwhile, Nguyen Thien Huong, officer of the Sustainable Banking Advisory Programme at the International Finance Corporation, highlighted the adoption of independent evaluation models as recommended by the majority of countries, noting that in 2019, 86 per cent of issued green bonds were subject to independent evaluation.

“In Vietnam, organisations providing certification services as well as those offering assurance services are well-positioned to confirm environmental aspects, social management, and green project validation. For these organisations to provide independent evaluations, there is a need to enhance their financial and technical capabilities,” she said.

More vibrant corporate bond market anticipated

With bright signs on the horizon right, experts and businesses expect the corporate bond market to heat up from this year's second quarter.

Figures by Saigon Ratings, the first credit rating agency in the country, show that businesses successfully issued over $830 million worth of corporate bonds in Q1 of this year, with a term from three to five years, down approximately 30 per cent compared to one year ago.

Despite diminished volumes, an apparent improvement was noted in the distributed volumes monthly. Along with this, the distributed volume in March tripled compared to the combined volume in the first two months.

Transactions of publicly traded bonds reached $279 million, averaging $13.9 million a day, up 8.4 per cent compared to February.

The new distributed volume in the first quarter mainly comes from residential property.

However, from late March, banks came back to bond issuance, marked with the participation of military-run MB. Accordingly, from late March to early April, MB embraced seven rounds of issuances with a total value approximating $102 million, with the term from seven to 10 years.

Bond transactions in the secondary market, where investors buy and sell bonds between themselves without involvement from issuing companies, have also been vibrant.

According to the Vietnam Bond Market Association, the total transaction value of corporate bonds through private placement in the secondary market came to nearly $3.8 billion in March, soaring 51.8 per cent compared to February. In which, 55 per cent of the total value came from the banking sector.

Nguyen Dinh Duy, financial analyst at VIS Ratings, assumes that positive changes in March came thanks to diverse factors, such as the reduced value of bonds associated with bad debts, improved rating prospects, debt restructuring and increased value of newly issued bonds compared to February.

That several bonds incurring late payment of yield to bondholders have completed their payment obligations, such as the case with Hung Thinh Investment JSC, has contributed to driving down the bonds associated with bad debt value.

“We estimate that about 10 per cent of bonds facing maturity in April, equal to $125 million, exposes a high level of risk, which is lower compared to March. In the next 12 months, there will be $9.8 billion of bonds facing maturity, with 15 per cent of them highly exposed to risk,” said Duy.

By the end of March, about $51.67 billion worth of corporate bonds were circulating in the market, of which $45.8 billion related to privately issued bonds. This includes nearly $16.67 billion of real estate related bonds, which incur a high risk

Phung Xuan Minh, chairman of Saigon Ratings, revealed that the debt payment pressures from bonds facing maturity in the remaining months of 2024 and beyond were huge, at $8.75 billion in 2024, increasing to $12.7 billion in 2025, and $9.17 billion in 2026.

“We expect the improved macro situation will help bolster investment activities and the demand for long-term capital raising. We also forecast that the bond market will be more vibrant in the quarters ahead as the continued low-interest environment will aid the bond investment channel, and expediting governmental Decree No.65/2022/ND-CP on offering and trading of private corporate bonds will also support a more stable bond market development in 2024,” said Minh.

Interest rates likely to remain fairly levelled

Encouraging credit expansion amid declining interest rates is crucial, but maintaining stringent standards is imperative to prevent a resurgence of non-performing loans.

In a discussion with VIR last week, Tran Duc Anh, head of Macro & Market Research at KB Securities, noted that the deposit interest rate landscape has hit record lows, while lending rates have relatively adjusted from their late 2022 peak, providing strong support for liquidity in the stock market over several quarters.

Specifically, in the first three months of the year, with credit growth at a low level and domestic consumption still weak, exchange rate pressures have not directly impacted the market interest rate landscape. In spite of this, the interest rate landscape continues to decline, contributing to increased market liquidity, with multiple trading sessions exceeding $1 billion in value.

“However, we do not believe that there is further room for deposit interest rate cuts given that the overall landscape is at historically low levels, while inflationary pressures and exchange rates signal caution,” Anh said. “Additionally, credit is expected to gradually recover in the latter half of 2024, corresponding to economic growth recovery. In the base scenario, the interest rate landscape is expected to remain flat or see slight upward movement in the low range, continuing to support the stock market.”

The State Bank of Vietnam (SBV) disclosed that while interest rates remain favourable, the banking sector grapples with subdued credit growth, recording a modest 1 per cent increase in total credit growth by April 10, falling short of the nearly 2.5 per cent pace seen during the same period last year.

Dinh Duc Quang, country head of Global Markets at United Overseas Bank (UOB) Vietnam, also believed that savings interest rates are currently at historic lows and may have bottomed out in the overall assessment of this low-risk investment channel compared to inflation, exchange rates, and capital demand in the economy.

“Low credit demand stems from various factors and may take time to return to normal levels. One contributing factor is the divestment of businesses in 2023,” Quang said.

According to the Ministry of Planning and Investment, the first three months of 2024 saw 53,400 businesses with halted operations – up 24.5 per cent on-year; 15,500 businesses stopped operations waiting for dissolution procedures – up 21.7 per cent; and 5,100 enterprises completed such procedures.

In an effort to maintain stability, Dao Minh Tu, Deputy Governor of the SBV, cautioned against aggressive lending practices, citing the escalating trend of non-performing loans (NPLs), which reached 4.55 per cent by the end of 2023.

“In 2023 alone, there was a 2.03 per cent increase in domestic NPLs, not to mention the restructured NPLs, sold to Vietnam Asset Management Company but not yet resolved,” stated Tu.

According to him, these rates indicate that credit cannot be aggressively expanded, disregarding standards, to prevent the economy from being burdened with NPLs, becoming a clot like it did over a decade ago, which still has not been fully resolved.

Dinh Cong Luyen, an analyst of MB Securities, projected a stabilisation of deposit interest rates in the second quarter of 2024, anticipating a slight increase of 0.3-0.5 per cent. He attributed this to gradual economic recovery and improving credit conditions.

“Despite the challenges, positive indicators in the economy, such as robust export performance and gradual real estate market recovery, offer hope for improved credit growth in the coming months,” Luyen said. “As of April 10, the credit growth of the economy reached over 1 per cent, although still low, indicating a gradual recovery in capital demand within the economy. This will impact the short-term business capital and foreign exchange plans of credit institutions.”

In addition, maintaining the current low interest rates by the SBV will have a positive impact on expanding business and increasing inventory levels for businesses, facilitating strong credit growth improvement in the next six months, Luyen added.

Yun Liu, economist at HSBC, noted that while monthly food prices fell, rice inflation remains elevated at double-digits.

“We continue to caution upside risks to food and energy inflation, though we do not believe inflation will likely overshoot the SBV’s 4.5 per cent inflation ceiling this year. Therefore, we do not expect the SBV to ease anytime soon,” she said. “We expect it to hold its policy rate steady at 4.5 per cent over our forecast horizon through 2025.”

ADB upbeat about Vietnam’s 2024 economic outlook, says bank country director

The Asian Development Bank (ADB) country director for Vietnam Shantanu Chakraborty has said the Asian financial institution is optimistic about the country’s economic prospects this year.

Chakraborty, in a recent interview granted to the Government portal, praised the government’s economic development effort, resulting in a 5.66% growth in the first quarter this year. The growth, he said, is one of the best in Asia that shows the resilience of the local economy amid domestic and global difficulties and challenges.

Global market uncertainties due to the prolonged conflicts in Ukraine and the Middle East are disrupting supply chains and reducing demand for commodities, especially for an export-driven economy like Vietnam, according to the ADB country director.

In addition, the loosening of the monetary policy may put pressure on the Vietnamese Dong (VND) in the near future.

Domestically, he said Vietnam needs to stimulate consumption supported by a prudent fiscal policy to increase the supply of cash in circulation.

Chakraborty recommended that the government ensure public investment goes in the right direction, and to do this it should further improve the legal environment and implement necessary policy reforms.

In his opinion, the main growth drivers of the local economy in the coming months will still be services, production, FDI and consumption.

Vietnam welcomed 4.6 million foreign arrivals in the first quarter of 2024, up 72% year on year and up 3.2% over the same period in 2019 dubbed the golden year of Vietnam’s tourism industry.

Export-oriented production will remain the major pillar of the economy. Despite challenges, agriculture expanded 3.8% in the first quarter thanks to increasing demand for farm products globally and the enforcement of free trade agreements Vietnam has signed with key partners.

Furthermore, FDI still plays an important role in the economy, and FDI attraction should be maintained moving forward, according to the ADB country director.

The first three months of 2024 saw Vietnam attract US$6.17 billion in FDI capital, an increase of 13.4% year on year.

Chakraborty recommended that Vietnam attract more quality FDI in infrastructure, with specific areas such as renewable energy, offshore wind power, economic zones, logistics and road connections.

With regard to local consumption, he said the country should deploy a prudent fiscal policy to boost consumption, through the spillover effect of public investment or through other tools such as extending VAT reductions, or strengthening social welfare.

Chakraborty also praised the Vietnamese Prime Minister addressing the recent 2024 Vietnam Business Forum that the country never obtains economic growth at all costs, stressing that the message is consistent with ADB’s strategic priority in Vietnam that focuses on green growth.

Source: VNA/SGT/VNS/VOV/Dtinews/SGGP/VGP/Hanoitimes