Vietnam’s economy is facing a paradox: bank loans are soaring while its stock market is already worth about $413 billion. Understanding why the country cannot cut interest rates despite this large market is essential for anyone watching its growth.

Outstanding bank loans now equal 145 percent of Vietnam’s GDP, which squeezes banks’ funding and pushes interest rates upward. Analysts say that this heavy reliance on borrowing makes it hard for the central bank to lower rates.

At the same time, the stock market’s total capitalization reached about VND10.7 quadrillion (around $413 bn) in October, representing roughly 82‑83 percent of GDP. This ratio is higher than Indonesia’s 65 percent but still below Thailand’s 93 percent.

Projections for 2030 show that only about 6 percent of total investment capital is expected to come from the stock market, while bank loans will still provide around 48 percent. The remaining financing will come mainly from corporate bonds.

The market’s ability to replace bank loans is limited because more than 80 percent of recent IPOs caused investors to lose money after one year, weakening confidence in long‑term equity. In addition, many large companies have low free‑float ratios and limited liquidity, making it difficult for institutional investors to take sizable positions.

Because banks remain the dominant source of funding, interest rates stay high even though the stock market is sizable. Improving the quality and liquidity of Vietnamese equities could create a stronger alternative to bank loans and help lower borrowing costs in the future.