What do you think are the challenges Vietnamese enterprises face after Covid-19?

The biggest risk for enterprises and the national economy now is liquidity. Businesses are all thirsty for capital but they cannot access bank loans, and commercial banks are not providing loans and blaming this on running out of credit limit room.

The debt spiral is washing away everything. Construction and installation enterprises owe money to steel suppliers, steel suppliers owe money to steel mills, and enterprises owe each other.

We have to avoid this situation because the financial market nowadays has become large and complicated, which is much different from that in 2009-2011. Regarding the size of the market, I estimate that it has the value of VND30 quadrillion, including outstanding bank loans, government bonds, local authorities’ debts and corporate bonds.

Of these, bank debts alone are worth VND11 quadrillion. Bank loans remain the major capital channel for businesses, so we must prevent the loss of liquidity, the most worrying thing for the economy.

The inflation rate is low, and the national economy ‘froze’ after two years of Covid, but the central bank only set the credit growth rate of 14 percent for this year, which is just a little higher than the rate of 2021, when Vietnam imposed very strict lockdowns. Do you think the figure is reasonable for 2022 when the economy has fully reopened?

If SBV defends the view on credit room loosening, it is now the right time to do this.

First, the inflation rate is low at this moment. The consumer price index (CPI) only grew by 2.58 percent in the first eight months of the year compared with the same period last year, while the CPI growth rate of the whole year is predicted to be below 4 percent.

Second, Vietnam’s inflation is a cost-push inflation. The prices of input material prices, both from imports and domestic sources, have led to a proportional increase in demand for capital.

Meanwhile, in the last two years of running out of capital, businesses have had to borrow more money, while depending on partners’ capital. If capital demand increases, banks have to increase lending to enterprises.

Third, managers’ worry about inflation is unreasonable. The inflation in Vietnam is caused by cost push, therefore it would be unreasonable to try to curb inflation by tightening monetary policy. Instead, Vietnam needs to use fiscal policy, and cut taxes and fees to ease enterprises’ expenses.

China, for instance, helps transport firms cut operation costs. The firms just need to register their vehicle number plates and the cars with those plates do not have to pay a fee when going through toll stations. The policy brought effects quickly.

Fourth, the total means of payment in the first half of the year only increased by 4.2 percent, which was very low and much lower than the credit growth rate of 9.62 percent. In other words, the pressure on inflation from monetary policy is very low.

One-sided view about stock market

But managers say they have loosened monetary policy and have helped to recover the economy?

In fact, the central bank doesn’t pump money into circulation. It buys foreign currencies and then withdraws money from circulation through OMO (open market operation) by issuing bonds, asking commercial banks to buy bills weekly and monthly. So, course, the money is not in circulation.

If SBV stops cash flow to the national economy, commercial banks will only have one way to get capital – from the public. As a result, they have to pay high deposit interest rates to attract capital.

The request to lower interest rates by 0.5-1 percent shown in the Government's resolution to stabilize the macroeconomy cannot be implemented. The current deposit interest rate has been pushed to above 7-8 percent, while the lending interest rate has increased to 12-13 percent.

If banks continue to tighten lending, this would lead to a bad debt explosion. Vietnam had to spend more than 10 years to restructure the banking system with Plans 254 and 1058 for 2016-2020, and the new plan for 2021-2025. How can an economy develop if it all day long is busy dealing with bad debts!

I agree with the opinion that in current conditions, Vietnam needs to prioritize to ensure macroeconomy stabilization. We needed to be cautious earlier this year when seeing signs of inflation. However, eight months have elapsed and if SBV still insists on not loosening credit room, businesses and the economy will lose liquidity.

The Prime Minister has released an instruction about how to deal with the real estate market after monetary and fiscal policies are tightened. What is your comment about this?

The instruction is reasonable. In all countries, real estate makes a great contribution to GDP. The figure is 20 percent in Vietnam, and 35 percent in the US. Many people now still have a one-sided view about the market, and they cannot see its positive things.

Tu Giang