HANOI — Vietnam’s breakneck credit expansion may fuel asset price bubbles, prominent academics in the Southeast Asian nation warned its lawmakers last week, documents showed.
The government is encouraging private lending and public spending to meet an 8.3%-8.5% gross domestic product (GDP) growth target this year. That is far above forecasts from multilateral agencies and private economists and comes as the export-reliant nation has been hit with new tariffs on its shipments to the US, its main foreign market.
In a closed-door meeting last week in parliament, at least two Vietnamese senior academics criticized the current year’s economic policy, a relatively rare occurrence in the tightly controlled, Communist-run nation.
“Vietnam’s money supply growth rate is very high, leading to the highest credit-to-GDP ratio in the region, and to risks of inflation and asset price bubbles,” said Pham The Anh, dean of economics at Vietnam’s National Economics University, in a paper that was discussed by parliament’s economic committee on Sept. 5 and a copy of which was viewed by Reuters.
And Vu Sy Cuong, associate professor of Vietnam’s Academy of Finance, said in another paper at the same meeting that the credit surge was also contributing to a stock market rally. A copy of that paper was also seen by Reuters.
Vietnam’s finance ministry and central bank did not reply to requests for comment. Mr. Anh told Reuters the central bank would need more independence to cool down asset prices. Mr. Cuong did not respond to a request for comment.
Loans in Vietnam last year were worth 136.4% of its $476-billion GDP, more than three times the median in emerging and middle-income markets, according to the latest data from the International Monetary Fund.
And, ahead of a crucial party congress in early 2026, bank credit grew at an annual 19.3% in the first half, Vietnam’s central bank said, exceeding a 16% cap for all of 2025 set by it, and well above an average of nearly 14% over the past five years.
Credit went primarily to developers and home buyers, the World Bank said in a report released on Monday.
Mr. Anh told lawmakers the credit binge has contributed to a “real estate price fever,” adding speculators were creating “ghost cities.”
As credit spiked, bad debt rose to 5.3% of loans by February from 5% last year, according to World Bank’s data that excludes sizeable off-balance-sheet lending.
Banks are also setting aside less capital for bad debt, with the ratio of their capital buffers nearly halving over the last three years, the World Bank said.
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The government has said it wants to start removing from next year credit growth caps, which in recent years have often been interpreted by banks as targets.
That could “accelerate credit growth and fan credit risks in the system if other prudential measures are not enforced,” said Willie Tanoto of Fitch Ratings.
While the government has called for control of inflation, which in August stood at 3.2%, it has not signaled any intention to slow credit growth.
Vietnam’s stock market has continued surpassing its peak since June, while margin debt, which is money investors borrow to acquire assets, hit a record high exceeding $11 billion in the second quarter, according to Vietnamese broker DNSE, representing roughly 5% of the stock market capitalization at the time.
“High economic growth is important, but economic stability in the long term has even greater significance,” said Mr. Cuong of Vietnam’s Academy of Finance. — Reuters
