Vietnamese banks are facing challenges in financing the country's ambitious economic growth targets, prompting a push for increased foreign investment. The need for external capital was highlighted by Nguyen Thanh Tung, chairman of Vietcombank, during a government-business conference on July 18. He stated that local banks are unable to meet the demand for credit necessary to support large-scale infrastructure projects crucial for achieving a projected economic growth rate of around 10% this year and continuing until 2030.
Key Details
Tung noted that total investment in Vietnam would need to reach approximately 40% of gross domestic product (GDP) to sustain this growth. However, the country's domestic savings rate is currently only about 36.5%, according to calculations from Vietcombank's macroeconomic research team.
The core issue is that banks will no longer have sufficient capital to meet credit demand, particularly for the many large-scale projects expected in the coming period,
Tung said.
Background
The government aims to increase bank lending to infrastructure, manufacturing, and priority sectors such as social housing while maintaining affordable borrowing costs. Despite these goals, domestic banks are heavily reliant on short-term funding, and the savings pool is not growing quickly enough to support the required investments. Additionally, lenders are struggling to keep interest rates low amid rising competition for funding and ongoing inflationary pressures. The State Bank of Vietnam (SBV) has acknowledged these challenges, emphasizing the need for a diversified funding approach.
The strain on Vietnam's banking sector could lead to increased borrowing costs and tighter credit conditions, particularly in sectors reliant on infrastructure financing. Investors may closely monitor the government's efforts to attract foreign capital to support growth initiatives. Watch for upcoming announcements regarding foreign investment strategies and infrastructure project financing plans.