Vietnam loan growth slows in Jan as dong lending slips

Vietnam bank loan growth slowed in January and dong lending slipped. Businesses are seeking dollar loans and sold dong to take advantage of a gap between local currency and dollar rates, central bank data showed.
 

Bank loans rose 0.43 per cent month-on-month in January, slowing from a monthly expansion of 2.28 per cent in December, the State Bank of Vietnam said in its monthly report for January.

Dong lending slipped 0.09 percent from December while dollar loans rose 2.37 percent, it added, without giving values.

The gap in lending rates between the domestic currency and dollar has been hovering at around 10 percentage points, bankers said, echoing a similar situation in the first quarter of 2010 when dollar loans jumped 14.07 per cent from December 2009 versus a rise of 0.57 per cent in dong lending.

Business executives have also complained about high dong loan rates of 18-20 percent, which they said encouraged them to deposit cash in banks instead of expanding operations.

Money supply last month fell 0.33 per cent from December, and deposits also dropped 2.46 percent, the report said.

The central bank has projected Vietnam's credit growth this year to slow to 23 per cent to control inflation, after a rise of 27.65 percent in 2010. Money supply growth is also projected to slow to 21-24 percent in 2011 from a rise of 23 per cent in 2010.