Analysis of the credit market by the Standard Chartered Bank in Vietnam said that low credit growth rates could be a positive sign for Vietnam economy.
In the report, Standard Chartered said enterprises are trying to limit their dependency on the loans and this could help to improve overall financial health.
According to the Government Office, as of November 20 customer deposits increased 15.98% and the loans increased by 4.15%.
Though the current official bad debt ratio, according to the State Bank, is at 8-10%, the rẹport said the actual ratio of bad debt is closer 15-20%.
In March, the Prime Minister approved a plan to restructure the banking system in the period from 2012-2015. The State Bank of Vietnam also promised to reduce the bad debt ratio by 3%.
However, Standard Chartered urged the Government make a detailed plan as to how to rescue the domestic economy.
While many others think Government should further slash interest rates, Standard Chartered said the interest rates should be kept stable in 2013 to prevent an unexpected surge of inflation.
Continuing to cut interest rates may affect customers' confidence in the banks, they stated, adding that the VND is weak because of bad debt and low confidence in Government policies.
They agreed with the Government's plan to restructure the state-owned enterprises (SOEs) since most of the bad debt come from to this sector.
If the Government can successfully reduce the number of SOEs and establish an agency to monitor all those enterprises, it could boost the confidence in the Government. But if it fails, the confidence will suffer greatly.
In the report, Standard Chartered downgraded Vietnam's economic growth rate to 5%, the lowest since 2000, after the Government carried out new monetary policies and faced difficulties in monitoring the SOEs.
Vietnam's GDP growth rate next year is also forecast to be 5.5%.