Hanoi (VNS/VNA) - The credit growth ofVietnamese banks in the first five months of this year expanded by 5.07 percentagainst the end of 2018, the State Bank of Vietnam (SBV) reported.

The rise was lower than that of the same periodlast year, when the credit rose by 6.16 percent.

Despite the moderation of credit growth, expertsare not concerned about the slowdown, saying it was even a good sign for theeconomy.

Can Van Luc, chief economist of the Bank forInvestment and Development of Vietnam (BIDV), said he was not surprised at themoderate credit growth, explaining the SBV had targeted controlling creditgrowth since the beginning of this year to curb inflation and stabilise themacro-economy.

According to Luc, local firms are no longer toodependent on bank loans as they could raise capital from the securities andbond markets. The domestic market has also witnessed new capital supplychannels, such as fintech and peer-to-peer companies.

As a result, Luc said moderate credit growth wasa good sign for the economy.

In addition, restructuring of bank loans hadimproved, he said, explaining that bank loans were pouring into the productionand business sectors, which were key drivers for the country’s economic growth.

Moody’s Investor Services also hailed the moderatecredit growth, saying it was positive for banks' asset quality andcapitalisation.

According to Moody’s, tighter credit could leadto rising problem loan ratios, reflecting the seasoning of banks’ loanportfolios. However, lower credit growth encouraged banks to focus on borrowersof better quality, which would improve asset quality in the long term.

Moderate credit growth would also lower pressureon capital, especially for State-owned banks, the rating agency said.

In the first five months of the year, lendingrates averaged 6 to 9 percent per year for short-term loans and 9 to 11 percentper year for medium- and long-term loans.

In the May macroeconomic report released lastweek, analysts from Bao Viet Securities Company (BVSC) forecast it would bedifficult for banks to cut lending rates next month due to risks of highinflation and impacts from the US-China trade conflict.

Inflation was still under the Government’scontrol, but the risk to high inflation might come due to impacts from porkprice hikes, BVSC analysts said, explaining the supply of the commodity wasdeclining due to the spread of African swine fever and it would have a strongimpact on the commodity’s price in the next two or three quarters.

In addition, the analysts said, the upward trendof core inflation was also quite clear, not creating favourable conditions forthe SBV to loosen monetary policy.

“In the context of increasing inflation andrisks to the financial market in the wake of the escalation of the US-Chinatrade conflict, interest rates are forecast to have no chance to decrease in thefuture,” BVSC analysts noted.-VNS/VNA