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COVER STORY

Tracking down cash flow

Mr. Pham Xuan Hoe, former Deputy Director of the State Bank of Vietnam (SBV)’s
Institute of Banking Strategy, shared his thoughts on cash flow in the first quarter and
its effect on economic growth at a recent discussion co-hosted by VET / VnEconomy.
By KIEU LINH

ddressing a recent roundtable dis- solutions won’t yield the desired results,” and 12.46 per cent in 2023. Using the
cussion co-hosted by Vietnam Eco- he said. “Hence, credit growth in the first alternative calculation method, where
A nomic Times / VnEconomy and quarter of 2024 reached only 0.26 per credit growth equals credit expansion
the University of Economics and Business cent, with two months in the negative: plus the increase in net foreign exchange
at the Vietnam National University - Hanoi, January at -0.68 per cent and February assets, credit growth reached 13.76 per
Mr. Pham Xuan Hoe, former Deputy Direc- at -0.6 per cent. March showed a 0.98 per cent. This indicates negative growth in
tor of the State Bank of Vietnam (SBV)’s cent increase. Most of the decline could net foreign exchange assets of approxi-
Institute of Banking Strategy, noted that be attributed to commercial banks employ- mately -1 per cent, with more money
macro-economic stability is often assessed ing money creation techniques to inflate flowing out of the country.
through the lens of the Consumer Price the denominator and total outstanding “I advocate for a thorough examination
Index (CPI). Inflation climbing above 5 debt, to create ample space for debt growth of why deposit interest rates are declining
per cent while GDP maintains growth of in the year to follow. I therefore propose so rapidly,” Mr. Hoe proclaimed. “Despite
7-8 per cent, he explained, would be far that the SBV refrain from utilizing credit the SBV reducing operational interest rates
more beneficial than rigidly aiming for a limit tools. Of course, following various four times, lending rates have decreased
CPI of 4-4.5 per cent while GDP growth directives from the Prime Minister, there at a sluggish pace. This is primarily because
hovers around 5-6 per cent. have been changes since 2024, and the money supply isn’t effectively circulating
SBV has set a 15 per cent credit limit in the economy, and Market 1 and Market
Destination of cash flow in Q1 from the beginning of the year.” 2 lack integration. Without the SBV inject-
When it comes to credit supply, Mr. M2 money supply witnessed growth ing money into the economy and with
Hoe pointed out that credit growth in the of 6.56 per cent in 2022. At that time, the funds remaining tied up at the central
first quarter of 2024 did not dip into neg- economy consistently faced money short- bank, cheap money isn’t viable. Hence,
ative territory for the entire quarter, as falls and liquidity issues, creating chal- achieving rapid reductions in lending inter-
was experienced in both 2013 and 2014. lenges for both businesses and individuals. est rates may prove challenging.”
Credit growth in 2023 experienced Under the World Bank’s formula, M2 Overall non-performing loans (NPLs)
unusual trends, with a notable 4.56 per should increase at least in line with GDP held by Vietnamese financial institutions,
cent rise observed in the closing 20 days growth plus inflation. as reported by the SBV, currently stand
of the year. “I am apprehensive that if Consequently, in 2022, M2 growth at over 6 per cent, including debts trans-
the data isn’t accurate, implementing should have ideally exceeded 9 per cent ferred to the Vietnam Asset Management

14 Vietnam Economic Times May 1, 2024 en.vneconomy.vn