At a conference reviewing banking sector performance in the first half of 2026, Pham Duc An, Governor of the State Bank of Vietnam (SBV), outlined a clear policy direction. Monetary policy will continue to support the goal of double-digit economic growth while ensuring that inflation remains under control, macroeconomic stability is preserved, credit quality is maintained, and the banking system remains safe.
The Governor’s message once again reflects the evolving role of monetary policy as Vietnam enters a period of faster economic growth.
For many years, monetary policy has primarily served as the economy’s anchor of stability—keeping inflation in check, maintaining exchange rate stability, preserving confidence in the national currency, and safeguarding the banking system.
Now, with higher growth targets set, that same anchor is being asked to perform an even more demanding task: maintaining stability while providing stronger support for economic growth.
The first six months of 2026 delivered encouraging results. GDP grew by 8.18 percent, while average consumer price inflation rose 4.38 percent, remaining within the government’s target range.
Monetary policy played a significant role in that performance.
Outstanding credit across the banking system reached VND20.03 quadrillion as of June 29, up 7.73 percent from the end of 2025, equivalent to roughly VND1.44 quadrillion in additional lending to the economy. From a growth perspective, this represents a positive signal, as bank credit has increasingly flowed back into productive business activities.
According to SBV, about 77 percent of total outstanding loans are directed toward production and business activities. Lending to exporters, agriculture, SMEs, and high-tech companies has remained a policy priority.
Another notable achievement is the exchange rate stability despite continued uncertainty in the global economy. For an economy with high openness like Vietnam’s, exchange rate stability extends beyond the foreign exchange market. It also underpins investor confidence, import costs, foreign currency debt servicing, and inflation expectations.
Policy interest rates have also remained at appropriate levels. SBV has worked directly with commercial banks, requiring them to lower deposit rates on new deposits with maturities of six months or longer, while also reducing lending rates to support businesses and households.
Challenges remain
Those achievements also mean that policy management will become even more demanding in the second half of the year.
The first trade-off is between growth and macroeconomic stability. Expanding credit more rapidly to support the economy requires even greater caution regarding credit quality and financial system stability.
The second is between exchange rate stability and interest rates. A stable exchange rate helps anchor market expectations, but it also limits the room available for further monetary easing.
The third trade-off is between lower interest rates and commercial banks’ funding balance. Lowering interest rates is a requirement for the economic recovery process, but when credit grows faster than capital mobilization, the pressure on banks to balance their funding sources increases.
The fourth is between prioritizing growth engines and ensuring access to capital for the entire economy. Allocating more credit headroom for social housing, industrial zones, and major projects aligns with development goals.
Nevertheless, along with this comes the challenge of ensuring that small and medium sized enterprises do not see their opportunities to access capital shrink, as this sector constitutes the majority of the economy.
Yet another trade-off is between credit speed and credit quality. Faster growth requires credit to be extended more quickly, but those funds must reach the right sectors while risks remain under control. That is why addressing bad debts, managing higher-risk lending, and safeguarding financial system stability must remain integral to the growth agenda.
Maintaining balance to preserve macroeconomic stability
The greatest test for monetary policy in the second half of the year will be its ability to maintain balance across multiple objectives: supporting growth while preserving exchange rate stability; lowering borrowing costs while maintaining adequate liquidity; and expanding credit without compromising credit quality or financial system safety.
Those objectives are ultimately more important than how much credit expands or how much interest rates decline.
The State Bank’s repeated emphasis on credit quality, bad debt resolution, funding balance, and financial system safety demonstrates that policymakers are concerned not only with the pace of growth but also with ensuring that such growth remains sustainable.
This distinguishes a monetary policy that supports growth from one that pursues growth at any cost.
Tu Giang