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Trillions in Bad Debt Stuck in Real Estate, Construction Sectors
๐Ÿ‡ป๐Ÿ‡ณ Vietnam /Economy & Trade

Trillions in Bad Debt Stuck in Real Estate, Construction Sectors

From Tuแป•i Trแบป · (1d ago) Vietnamese Critical tone

Translated from Vietnamese, summarized and contextualized by DistantNews.

TLDR

  • Vietnam's non-performing loans (NPLs) are on the rise, particularly in the real estate and construction sectors.
  • While on-balance sheet NPLs are controlled, hidden bad debts pose a growing risk to the banking system and economy.
  • Experts urge comprehensive and timely solutions to address these frozen assets, which could amount to trillions of dong, to ease interest rate pressures and support economic growth.

The Vietnamese economy is facing a significant challenge with the escalating issue of non-performing loans (NPLs), a situation that threatens to freeze vital capital and impede recovery. As reported by Tuแป•i Trแบป, while official figures for bad debts within the banking system are reportedly under control, a more concerning trend of hidden NPLs is emerging, particularly concentrated in key sectors like real estate, construction, and exports.

Experts like ฤแบทng ฤรฌnh Thรญch, Acting General Director of the Vietnam Asset Management Company (VAMC), warn that these accumulating bad debts are not just a legacy problem but a growing risk for the future. The sheer scale of these frozen assets, potentially reaching trillions of Vietnamese dong when considering all forms of bad debt, represents a substantial portion of the nation's economic potential being held back.

These factors show that non-performing loans are not just a problem of the past, but also a risk accumulating for the future. If there are no synchronous, timely, and strong enough solutions, non-performing loans risk returning, putting great pressure on the banking system and the economy.

โ€” ฤแบทng ฤรฌnh ThรญchThe Acting General Director of VAMC warns about the future risks posed by accumulating bad debts.

Compounding the issue are the persistent legal and procedural hurdles in resolving these NPLs. Despite amendments to laws, including granting banks more power to seize collateral, practical implementation remains difficult. The lengthy processes involved in seizing, auctioning, and transferring ownership of collateral often lead to disputes and delays, hindering the recovery of funds. This bottleneck is particularly problematic as Vietnam aims for high growth targets, with credit growth outpacing deposit growth, indicating pressure on capital balancing.

Addressing this crisis is paramount for unlocking capital, supporting businesses, and ultimately reducing interest rate pressures. As Nguyแป…n Quแป‘c Hรนng, Vice Chairman of the Vietnam Banks Association, emphasizes, effectively resolving NPLs would allow the banking system to lower costs, thereby creating room for interest rate reductions and fostering sustainable economic growth. The call for a more robust legal framework, improved inter-agency coordination, and a more efficient debt trading market underscores the urgency and complexity of the situation from a Vietnamese perspective.

The important thing is to unlock capital for the economy, support businesses to recover and develop.

โ€” Nguyแป…n Quแป‘c HรนngThe Vice Chairman of the Vietnam Banks Association highlights the need to free up frozen capital.
DistantNews Editorial

Originally published by Tuแป•i Trแบป in Vietnamese. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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