With credit growth showing a marked rise in the second quarter, theState Bank of Vietnam's target of 12-14 percent for the year seemslikely to be realised.

From only 1.8 percent after the first twomonths, the Commercial Joint Stock Bank for Foreign Trade of Vietnam'scredit growth rose to 3.16.percent by the end of May.

The Military Joint Stock Commercial Bank has reported lending growth of around 6 percent and deposit growth of 10 percent.

TheSBV's HCM City office said as of May 31 outstanding medium- andlong-term credit in the city had increased by 3.16 percent this year.

DangNgoc Khanh, General Director of SeAbank, said his bank expected creditgrowth to top 6 percent in the first half of the year, or 50 percent ofthe year's target.

Analysts at the Viet Capital Securities JointStock Company said the central bank's credit growth target of around 13percent for the year appears feasible.

Khanh said his bankrecently signed many large credit deals with companies and was waitingto disburse the sums, he said. The bank has also lent hundreds ofbillions of dong in retail loans, he said.

He attributed the rising credit demand due to positive changes in the economy.

Businessactivities are recovering while inventories are decreasing, the housingmarket is reviving, and exports are rising, he explained.

Economistsagreed, saying that the recovery in credit growth was also due to thefact that the measures adopted by the central bank to help companiesbattle their difficulties have begun to take effect.

Two of themost productive measures were to lower lending interest rates and bringbanks and companies closer together, they said.

The central bankhad urged banks to cut interest rates on businesses' old debts to below13 percent and the current rate cap for priority sectors from 9 percentto 8 percent.

As a result, by May 25 interest rates were cut by 0.5-1.5 percent from the levels recorded late last year.

DrTran Hoang Ngan, a senior banking expert, told Thoi Bao Kinh Doanh that"the recent cuts in interest rates are reasonable. But it would bebetter for credit growth if the rate is further cut by 0.5-1 percent."

Healso stressed the need for measures to improve aggregate demand in theeconomy, and help companies access banks loans to ensure credit growth.

Analystssaid since 96 percent of the companies in the country are small ormedium-sized, and most of them face difficulties with administrativeprocedures and assets to be pledged to borrow from banks, the Governmentneeds to assist them.

If businesses manage to overcome theirdifficulties they would become stronger and contribute to the recoveryof the economy and improving aggregate demand, they added.-VNA