Vietnam's loan growth beats new year slump after rising 5% from January to April

The government is doubling down on the country’s bad debt.

Vietnam banks’ loan growth expanded 5% from January to April, according to Monetary Policy Department director general Pham Thanh Ha.

The credit expansion represents a healthier growth as loan growth usually clocks in between a 3-3.5% range in the early months due to less manufacturing activity brought about by the Lunar New Year holiday, he added.

The credit build-up can be attributed to ongoing efforts to restructure the banking sector as the government doubles down on its massive bad debt burden to clean up the balance sheets of banks.

Bad debt at credit institutions late last year was below 2.46% in end-2016, said Pham Huyen Anh, deputy chief inspector of the central bank.

“We estimate total NPLs would have declined to 7.9% by the end of 2017 from 8.6% in Sep’17, which we expect will decrease further to 6.1% by end-2018,” according to a report from Maybank Kim Eng.

Analysts also remain bullish about the capacity of the Vietnam Asset Management Corporation (VAMC) to halt the country’s ballooning bad debt with estimates that it can solve as much as 45.5% of Vietnam’s non-performing loans by 2018.