The central bank in Vietnam announced it had increased the 14% cap on credit growth for 2022 by 1-5 – 2.0 percentage points.

The move by the State Bank of Vietnam followed the country’s property and financial markets grappling with a credit crunch in recent weeks as the bank hiked its policy rate. 

In a statement, the central bank said those banks with strong liquidity and offering low-interest rates will qualify for a rise in their credit growth, Reuters reports. 

“These are flexible measures for the time being,” the central bank stated. 

Governor of the central bank, Nguyen Thi Hong urged lenders to give priority to sectors that can help generate momentum for economic growth, including production, farming and exports, Bloomberg reports. 

“Increasing credit growth will go hand-in-hand with risk control to ensure businesses’ liquidity and operational safety, and solvency, especially for the Lunar New Year,” the bank’s statement added. 

The State Bank of Vietnam said it would monitor the situation closely, particularly inflation, in order to prepare the 2023 monetary policies.

Vietnam is one of Asia’s fastest-growing economies, bolstered by robust manufacturing and exports. In addition, economic growth also depends heavily on strong credit growth.

The Vietnamese economy has rallied from the pandemic, but declining global demand and a stronger U.S. Dollar led the central bank to hike its policy rates by 200 basis points in total and allow the Dong to weaken against the greenback.

The rate hikes, together with the government’s rule tightening on the issuance of corporate bonds and restricting their financing, left the country’s economy grappling with a credit crunch, the Reuters news agency report adds.