Credit policy is not main cause

During a session with the National Assembly Standing Committee, Minister of Planning and Investment Nguyen Chi Dung stated that many businesses are facing cash flow shortages due to sudden changes in the credit policy. Cash-strapped firms were forced to sell their assets at half their actual value to stay afloat during tough economic times, with foreign businesses being their buyers. However, is it right to blame the credit policy, or is it just the tip of the iceberg?

The strict credit policy of last year is one of the contributing factors to the cash flow disruptions in many businesses. Still, would the economy be stable if the credit policy was not tightened for real estate and securities?

Could Vietnam sustain its low-interest-rate policies while other countries raised interest rates significantly to combat inflation last year? Most major economies worldwide, especially Vietnam’s main export and import markets, kept increasing their interest rates to combat inflation last year. As a highly open economy, Vietnam could not go against the global trend. With a tight monetary policy over the past year, the country has been quite successful in combating inflation and maintaining financial market stability. When the inflation risks are reduced, the credit policy will be loosened. Moreover, the central bank ordered strict credit control for risky areas such as real estate and securities trading to prevent bubble bursts.

The changes in monetary policy over the past year were foreseen. As Vietnam and many other countries launched massive credit packages to prop up economies after the Covid-19 pandemic, many economic experts had already cautioned about the inflation risks and the need for key interest rate hikes.

Regarding the real estate sector, many experts had warned about bubble bursts and their negative impacts on the banking system as property prices skyrocketed. When the credit policy was tightened, many firms sought alternative funding through corporate bonds. As a result, they might face the risk of bond defaults when the real estate market is frozen.

Given the forecasts of potential risks, businesses should have developed suitable management policies to cope with the situation proactively. With effective measures to tackle economic difficulties, many businesses were not on the brink of a collapse or forced to sell off assets at discounted prices just to survive, as those firms mentioned by Minister Nguyen Chi Dung.

Risk management plays a crucial role in helping businesses head toward sustainable development. It is hoped that the challenges many cash-strapped firms face in the real estate and stock market sectors will be valuable lessons for themselves and others to overcome economic tough times.