On the surface, the figures signal a robust effort to stimulate recovery and sustain growth. Yet behind the headline numbers lies a more complex narrative of structural vulnerabilities, rising leverage, and the delicate balancing act faced by policymakers.
Rising credit, thinning cushions
By the end of June 2025, total outstanding loans in the Vietnamese banking system had climbed to over VND 17.2 quadrillion, up 9.9 per cent since December and almost 20 per cent higher than a year ago. In just six months, banks have pumped nearly VND 1.6 quadrillion into the economy – a scale of intervention that would be considered aggressive in any market.
But a closer look at the liquidity picture reveals growing pressures. By the end of the first quarter, 16 of 28 commercial banks reported a loan-to-deposit ratio (LDR) higher than at the start of the year. Some even breached the 100 per cent threshold, effectively lending more than they mobilised – a sign of stretching balance sheets.
On paper, system-wide liquidity remains intact. The capital adequacy ratio (CAR) and overall LDR still meet regulatory requirements. Larger banks retain some capacity to raise deposits, while the State Bank of Vietnam (SBV) continues to manage liquidity via open market operations. Yet the widening gap between credit growth and deposit mobilisation is steadily eroding the system’s “safety buffer”.
This leaves banks more vulnerable to external shocks – from exchange rate swings and imported inflation to sudden deposit outflows. To ease the pressure, banks have been issuing bonds aggressively to shore up medium- and long-term funding and bolster Tier 2 capital to improve their CAR. But this approach merely defers the strain, as large volumes of bonds will eventually mature, creating fresh liquidity challenges down the line.
Meanwhile, Vietnam’s credit-to-GDP ratio has been climbing inexorably: 113.2 per cent in 2021, over 125 per cent in 2022, about 130 per cent in 2023, and 134 per cent last year. This trajectory highlights both the country’s growth dynamism and its deep dependence on credit to fuel economic activity.
Most domestic enterprises remain heavily reliant on bank loans, lacking the internal capital reserves to reduce leverage. Building genuine financial resilience is likely to be a drawn-out process, requiring broader structural reforms. It is little surprise, then, that the International Monetary Fund and the World Bank have repeatedly flagged Vietnam’s credit intensity as a systemic risk. Their concern extends beyond the scale of lending to its maturity mismatch: around 70–80 per cent of deposits are short term (less than 12 months), while the bulk of loans are medium or long term, creating a structural imbalance.
Misaligned flows of capital
Even more worrying is where the money is going. According to WiGroup, a domestic financial data provider, credit flowing into manufacturing has stagnated since early 2024. Lending to trade, transport, and telecommunications has held steady at 18–19 per cent of total credit. By contrast, borrowing in other sectors – especially consumer lending and real estate – has surged, hitting record highs.
Yet consumer demand has been subdued, suggesting that much of the new credit is being channelled into property and construction. That is consistent with the funding squeeze faced by developers. Historically, listed property firms sourced around 60 per cent of their debt via bond issuance. But this market has contracted sharply, with the total value of outstanding bonds plunging from nearly VND 600 trillion to just over VND 100 trillion. With fewer bonds being issued, developers have turned back to the banks to refinance, effectively shifting their debt burden onto the formal banking system.
Economists broadly agree that opening the credit taps is necessary to sustain growth in the short term. But the key issue is not the volume of money injected – it is whether that money reaches productive sectors and viable businesses. If credit continues to pour into speculative assets, non-essential consumption, or sectors with weak fundamentals, the growth it generates will be illusory. The risks, however, will be real, undermining both financial stability and long-term economic health.
Uncontrolled credit expansion risks distorting capital allocation, inflating asset bubbles, weakening loan quality, and fuelling inflationary pressures.
So far, inflation has remained manageable. Consumer prices in the first half of 2025 are higher than the 2015–24 average but not alarmingly so. However, the money supply is set to outpace nominal GDP growth again in the second half of the year, potentially creating upward pressure on prices and destabilising exchange rates.
This puts the SBV in a challenging position. It must act as a cautious yet flexible conductor, fine-tuning liquidity to sustain growth without jeopardising macroeconomic stability. In practice, this means calibrating credit expansion carefully: opening the tap, but only selectively; fuelling momentum, but not in a way that inflates systemic risks.
For Vietnam, this balancing act has profound implications. Growth driven by over-leverage and speculative activity would be unsustainable. But overly tight credit would stall recovery and risk tipping struggling businesses into insolvency. The solution lies in steering capital towards the right places: productive industries, export-oriented firms, and enterprises with strong fundamentals, rather than speculative or non-productive uses.
In the medium term, structural reforms are essential to ease the economy’s dependence on bank credit. Developing deeper capital markets, expanding non-bank financing channels, and encouraging corporate deleveraging would gradually reduce systemic vulnerabilities. Without such measures, Vietnam’s banking system will continue to act as the economy’s main engine – but also its weakest point of resilience.
Vietnam has shown remarkable agility in using credit as a tool for growth. But the current phase of expansion is testing the limits of that approach. The country’s policymakers now face the difficult task of maintaining growth while safeguarding financial stability.
The SBV, in particular, will need to remain vigilant, responding swiftly to signs of stress – whether in liquidity, asset quality, or inflation. Selective credit growth, tighter scrutiny of real estate lending, and clearer guidance on bond market restructuring may be necessary steps in the months ahead.
Ultimately, Vietnam’s economic trajectory will depend on how effectively it can recalibrate its growth model – shifting away from credit-fuelled expansion towards more sustainable drivers of productivity and investment. The challenge will be to unlock growth without eroding the safety buffers that have, until now, kept the system stable.
