Speaking with Saigon Investment, Dr CẤN VĂN LỰC, a member of the National Financial and Monetary Policy Advisory Council (NFMPAC), said that external challenges in 2023 could come with both advantages and uncertainties which is why Vietnam should prepare well for all untoward situations.
JOURNALIST: - Sir, what do you think about the State Bank of Vietnam move early this month to extend credit room by 1.5% to 2% while some experts believe credit room expansion so late in the year will prove insignificant?
Dr CẤN VĂN LỰC: - The State Bank of Vietnam move to increase credit by 1.5% to 2% basically remains within the credit growth cap of 14% as set forth by the goal for this year and does not increase cash flow excessively. The State Bank of Vietnam has made this decision for three reasons. First, external pressures like inflation and exchange rates have decreased, and the US dollar has lost about 3.5% in November. Second, the inflation rate has been controlled relatively well, and it is predicted to be only at about 3.3%.
Third, pressure on an exchange rate rise has become less than before, liquidity in the banking system has improved, and people have begun to put more money in banks than they did earlier. Additionally, there is great demand for capital in the market, including for consumers and businesses. Allowing for credit expansion will improve liquidity and provide more capital to enable companies to maintain and restore production and business activities. Therefore, credit growth at this time is vital.
The question is which priority areas the capital will flow into after the credit room is loosened. Currently, many credit applications are still on the waiting list, with a huge number of customers in need for capital. So, with the credit cap raised, the amount of credit capital of about VND 200 trln will be provided, with very large amounts flowing into major areas, namely, production, business, and consumption. No credit institution now wants to use that money for speculative lending because the challenges and risks are predicted to be relatively high in the coming year.
Another issue of public interest is whether the expansion of credit room will affect inflation or not. In fact, an amount of VND 200 trln in the market is not too large compared to huge amounts of money invested in the whole society. The current capital absorption capacity in the market is assessed to be relatively good, and this year's inflation rate is under control, which means such a credit room increase will not have a negative impact on inflation and macroeconomic stability indicators. Next year, inflation is expected to rise higher, at an acceptable rate of 4% to 4.5%.
- Sir, over the last several months, real estate companies have been in dire need of capital due to credit tightening. A few experts have expressed concern that the real estate market will fall into recession. What is your opinion on this?
- I believe we should re-evaluate the macroeconomic and financial situation before we can evaluate the current real estate market. Although the problem of recession is entering different parts of the market, including real estate, the Vietnamese market is unlikely to decline. In 2022, Vietnam saw its economic growth climb by 8% and it is predicted to be 6% in 2023, and we have already made important improvements.
Moreover, Vietnam’s growth rate of 6% is very high, compared to other regional economies. There is no denying that Vietnam can only slowdown in terms of growth, rather than fall into a recession. Some experts think that the real estate market is very likely to fall into recession in the coming years. However, it will be temporarily called a technical recession, rather than a decline, if it slides down continuously in the fourth quarter, compared with the first few months of the year. This is the process of operating the market in an effort to send it into healthy development.
From now until 2023, there will be a number of risks and challenges, which can be referred to as four increases and two decreases. Four increases include higher uncertainties, higher inflation rates, higher deposit interest rates and higher financial risks. Two decreases include a decline in profit margin at companies and a slower recovery of the economy or a slight economic recession in 2023. This is also the time when there are fast-moving trends such as digital economic activities, green finance, or energy transformation and green real estate.
- Sir, 2023 is predicted to have lots of challenges for the Vietnamese economy. What is your opinion on this matter?
- In 2023, the domestic consumer market may make a considerable recovery. In 2022, the country's GDP reached about 8%, but in 2023 experts predicted it to be lower, at just about 6%. A good recovery should take place in 2023, although it will still be a bit bumpy both in the domestic economy and in the global markets.
The global markets are predicted to experience another recession in 2023, but a mild and short one. The global growth rate in 2023 is forecast to reach 2.5%, down 0.5%, compared to 2022, which is a very slight decrease. Particularly in developed countries in Asia, the peak inflation rate is about four per cent a year. This means Vietnam’s economic growth rate will remain at four per cent a year, which is the common rate in Asian countries.
In general, Asian economies are experiencing three financial shocks with several risk factors. One, China's economic growth which continues to slow down, resulting in a plunge in the total demand which is likely to cause global growth to drop by one percentage point in 2023. Two, a slight global recession will reduce aggregate demand for tourism, shopping, and textiles.
Three, financial market conditions will become more difficult, leading to more risks and higher yields. These three factors have caused the Asian economy to sink by about one percentage point. Particularly, Vietnam's economy will tumble by nearly 2% points. Drastic measures must therefore be taken now to mitigate the negative effects. It is imperative to make it possible for businesses and the entire economy to become more resilient to fight adverse influences.
- Thank you very much.