Vietnam’s economy, despite demonstrating robust growth in the first half of 2026, continues to exhibit a significant dependence on bank capital, raising concerns about long-term financial stability and sustainable development. This critical issue was a central theme at the "Solutions for Synchronous Capital Market Development" workshop held on July 23, where experts and policymakers convened to discuss strategies for rebalancing the nation’s financial structure.
Robust Credit Expansion Fuels Economic Growth Amid Global Uncertainty
According to Ms. Ha Thu Giang, Deputy Director of the Department of Credit for Economic Sectors at the State Bank of Vietnam, the total outstanding credit across the Vietnamese economy reached nearly 20.1 quadrillion VND by July 13. This represents a substantial 7.86% increase compared to the end of 2025. Such a rapid expansion indicates that within the first half of the year, the banking system injected approximately 1.46 quadrillion VND into the economy, playing a crucial role in supporting production, business activities, and overall growth momentum.
This significant capital infusion has coincided with impressive macroeconomic performance. Ms. Giang reported that in the first six months of 2026, Vietnam’s Gross Domestic Product (GDP) grew by 8.18% year-on-year. This figure not only surpassed the 7.63% growth recorded in the same period of 2025 but also marked the highest growth rate achieved in the 2011-2026 period. This achievement is particularly noteworthy given the prevailing volatility and uncertainties in the global economy, underscoring the critical contribution of monetary policy and credit expansion to Vietnam’s economic resilience and upward trajectory. The consistent upward trend in GDP growth, especially in a challenging international landscape, highlights the effectiveness of recent economic policies in stimulating domestic demand and supporting key sectors.
Mounting Pressure and High Leverage: The Banking Sector’s Dilemma
Despite these positive indicators, the banking system is facing increasing pressure to meet the economy’s burgeoning capital demands. Ms. Giang highlighted that the total social investment capital for 2026 is projected to be around 5.1 quadrillion VND, with an even more substantial requirement of 38.5 quadrillion VND for the 2026-2030 period. These ambitious investment targets are crucial for sustaining Vietnam’s development goals, including infrastructure upgrades, industrial modernization, and fostering innovation.
However, the current financial architecture reveals a deep-seated structural imbalance. The credit-to-GDP ratio in 2025 already stood at approximately 145%. This high ratio signifies that the Vietnamese economy remains heavily reliant on bank loans for its funding needs. While bank credit is essential for short-term financing and working capital, an over-reliance on this channel can lead to several challenges. It exposes the banking system to heightened systemic risks, particularly if there are economic downturns or shocks that affect borrowers’ repayment capacities. Furthermore, it can limit the availability of long-term capital for large-scale infrastructure projects and innovative ventures, which typically require funding structures that extend beyond traditional bank loan maturities. The high credit-to-GDP ratio also suggests that Vietnamese enterprises, particularly small and medium-sized enterprises (SMEs), might find it challenging to access diverse forms of financing, making them vulnerable to fluctuations in bank lending policies and interest rates.
Expert Insights: The Need for Structural Transformation
Dr. Can Van Luc, Chief Economist at BIDV and a member of the National Financial-Monetary Policy Advisory Council, reinforced these concerns, emphasizing that Vietnam’s ambitious high-growth targets necessitate substantial capital. However, he cautioned that the banking credit channel is nearing its leverage limits. Comparing Vietnam to other nations that consistently maintain over 10% growth rates, Dr. Luc noted that these economies typically have a social investment capital-to-GDP ratio of 39-43%. Within this, capital—encompassing money, technology, machinery, equipment, and human resources—contributes significantly, often 45-50% or even higher, to economic growth.
Dr. Luc critically assessed Vietnam’s current growth model, stating that no economy can sustain long-term growth primarily driven by capital and labor inputs. He stressed the urgent need for a strategic shift towards growth powered by science-technology, innovation, institutional reforms, and enhanced productivity. This implies a move away from simply mobilizing more capital towards optimizing its allocation and utilization. He advocated for a combined approach of investing, absorbing technology, and fostering innovation, while simultaneously improving the efficiency of resource deployment, rather than solely focusing on capital mobilization. This paradigm shift is essential for Vietnam to transcend the middle-income trap and achieve advanced economic status.
Diversifying Capital Channels: The Imperative for Capital Market Development
To meet the projected investment needs and alleviate pressure on the banking sector, diversifying capital channels is paramount. Dr. Luc detailed the substantial capital requirements for the upcoming periods: to achieve an average growth rate of approximately 10% by 2030 and around 8% during 2031-2045, Vietnam needs an estimated 38.5 quadrillion VND in total social investment capital for the 2026-2030 period alone.
This colossal funding requirement is expected to be sourced from various channels. State capital is projected to contribute around 8.5 quadrillion VND, while foreign direct investment (FDI) is anticipated to provide approximately 4.8 quadrillion VND. Crucially, the domestic private sector, both local and foreign-invested, is expected to shoulder the largest burden, needing to contribute about 25.5 quadrillion VND, accounting for roughly 65% of the total capital demand. This significant reliance on private capital underscores the necessity of fostering an environment conducive to private investment and robust capital markets.
Dr. Luc underscored that the challenge extends beyond merely mobilizing additional capital; it critically involves expanding and enhancing the efficiency of existing and new capital channels. Currently, Vietnam’s financial resources predominantly flow from bank credit, the capital market, public investment, and FDI. However, each channel presents distinct limitations. As previously noted, the banking credit channel is approaching its leverage limits, posing risks. The stock and bond markets, along with investment funds, possess significant untapped potential but remain underdeveloped relative to the economy’s scale and needs. Public investment, while capable of expansion, requires continuous improvement in capital utilization efficiency.
This reality necessitates a comprehensive restructuring of the financial system towards a more balanced distribution of funding sources. The capital market, in particular, must be developed more rapidly to meet the growing demand for medium- and long-term capital, thereby reducing the heavy burden currently borne by the banking system. A well-developed capital market offers alternative funding avenues for businesses, facilitates risk diversification, and promotes more efficient capital allocation across the economy. It allows for longer investment horizons, crucial for large infrastructure projects and high-tech industries that require patient capital.
Harnessing New Channels: The International Financial Center and Strategic FDI
In a complementary perspective, Assoc. Prof. Dr. Nguyen Huu Huan, a lecturer at Ho Chi Minh City University of Economics, proposed that an international financial center could serve as a vital new channel for mobilizing medium and long-term capital. He suggested that the proposed Ho Chi Minh City International Financial Center could aim to mobilize approximately 10-30 billion USD annually during the 2026-2030 period. This would correspond to about 3-10% of the economy’s total investment capital needs, providing a significant supplementary source to existing channels like the stock market, bond market, and domestic investment institutions. For this center to be effective, however, it must genuinely become a conduit for international capital flowing into the real economy, rather than merely serving as a hub for financial transactions or a platform for offering preferential policies. Its success would hinge on its ability to attract significant foreign investment, foster sophisticated financial services, and integrate Vietnam more deeply into global financial networks.
Parallel to this, experts from the Private Economic Development Research Board (Ban IV) highlighted the strategic importance of foreign direct investment (FDI). They emphasized that Resolution No. 10 of the Politburo targets FDI attraction not solely for capital injection but also as a means to facilitate technology transfer, develop domestic supplier networks, and strengthen linkages with local enterprises. This reflects a shift towards qualitative FDI attraction, prioritizing projects that bring advanced technology, management expertise, and integrate Vietnamese companies into global value chains. To achieve this, Ban IV recommended prioritizing credit programs, guarantees, and co-financing for Vietnamese enterprises to enhance their capacity to participate in global supply chains. Furthermore, efforts should be made to create favorable conditions for private domestic enterprises to access the stock market, bond market, and financing for mergers and acquisitions (M&A) activities, thereby diversifying their funding options and enabling strategic growth.
Human Capital and Institutional Reforms: The Long-Term Growth Drivers
Beyond capital mobilization, the discussion at the workshop extended to the foundational elements of sustainable growth, particularly human capital and institutional quality. Assoc. Prof. Dr. Nguyen Huu Huan acknowledged the intense competition for FDI, with regional rivals like Indonesia and Thailand consistently offering preferential policies. He identified Vietnam’s key competitive advantages as the quality and diligence of its human resources. Vietnamese workers are often praised for their adaptability, strong work ethic, and quick learning abilities.
However, a significant challenge remains: Vietnam’s labor productivity and human resource quality still lag behind many countries in the region. Dr. Huan pointed out that Vietnam’s labor productivity is currently only about one-eighth of Singapore’s. This stark difference underscores a critical area for improvement. Interestingly, he added that if a Vietnamese worker were placed in Singapore’s advanced working environment, they could achieve productivity levels comparable to their Singaporean counterparts. This observation strongly suggests that the gap in productivity is not solely due to inherent human capital deficiencies but is also heavily influenced by the institutional framework, infrastructure, and technological ecosystem in which labor operates.
Therefore, Dr. Huan asserted that Vietnam must continue to invest strategically in institutions, infrastructure, and core technologies. This investment should not be short-sighted but part of a long-term strategy spanning 5-10 years or even longer. Such sustained efforts are essential to create the necessary impetus for development in the new era, fostering an environment where human potential can be fully realized and productivity can be significantly boosted. This includes reforms in education and vocational training to align skills with the demands of a high-tech economy, improvements in governance and regulatory frameworks to reduce bureaucratic hurdles, and sustained investment in digital infrastructure and research and development.
In essence, Vietnam is at a critical juncture where merely increasing capital inputs will not suffice for sustained high growth. The nation must pivot towards a growth model that prioritizes qualitative factors: developing sophisticated capital markets, attracting high-quality FDI that fosters technology transfer, and making strategic, long-term investments in human capital, institutional reforms, and cutting-edge technology. These structural changes are indispensable for building a resilient, innovative, and truly developed economy capable of navigating future global challenges and achieving its ambitious development goals. The discussions at the workshop serve as a crucial roadmap for policymakers to implement these transformative changes in the coming decade.
