Vietnam central bank attempts to address sluggish growth

The State Bank of Vietnam’s latest move to reduce interest rates comes after other central banks around the globe have started easing to combat spreading weaknesses, but experts are warning that such decisions may not yield the desired effects.

Vietnam central bank attempts to address sluggish growth
The VN State Bank's headquarters in Hanoi.

An interest rate cut by 25 basis points since 2017 by the State Bank of Vietnam (SBV) was recently accompanied by a message that sets a higher bar for further easing later this year. The annual refinancing rate and rediscount rate will be lowered from 6.25 to 6 per cent, and from 4.25 to 4 per cent, respectively.

The annual overnight electronic interbank rate and rate of loans to offset capital shortage in clearance between the central bank and domestic banks will be also cut to 7 per cent. The interest rate of bids of valuable papers through open market operations will be reduced from 4.75 per cent to 4.5 per cent annually.

The cut is made in the context of a stable domestic macro-economy, the SBV wrote in a statement, emphasising that “Inflation in Vietnam remains under control, while monetary and foreign exchange markets are also stable.”

At a press conference held last week, SBV Deputy Governor Dao Minh Tu said that the state bank had successfully kept the local currency relatively stable by reducing certain rates and applying the management policy based on the overall balance of the economy such as imports and exports, public debt, balance of payments, and current accounts.

Economist Nguyen Tri Hieu stated that the cuts would help spur Vietnam’s growth and boost exports, especially in the background of escalating trade tensions between the United States and China.

Market watchers, on the other hand, believe that the SBV’s decision comes after central banks of other countries lowered their key interest rates, showing eagerness to tackle slowing growth and economic uncertainty, particularly through the outlook for the US-China trade war.

For example, India’s Monetary Policy Committee brought down the repo rate by 35 basis points to 5.4 per cent, its lowest level in nine years.

The Bank of Thailand, meanwhile, surprised experts with a cut on its benchmark rate for the first time in more than four years to boost the economy, and said it sees more room to ease as global risks surge.

In the US, the Federal Reserve also reduced rates by a quarter percentage point for the second time since July, as concerns grow about a potential global slowdown.

The European Central Bank is following suit by pushing interest rates further into negative territory in order to support the region’s flagging economy.

 

The aim of these moves is to perk up a sluggish economy and subpar inflation rates. An economic slowdown has proved more protracted than expected, analysts at The Economist wrote.

“However, this may add upward pressure on inflation in Vietnam,” Hieu said.

According to the latest data provided by the General Statistics Office, Vietnam’s inflation cooled to 2.57 per cent in August, down from 3.52 per cent in August 2018, with the rate having the lowest rise for the past three years.

The exchange rate was also steady, with the US dollar listed at commercial banks to inch up by only some VND10 for buying and VND30 for selling since the end of 2018.

Although analysts have raised expectations of rates reducing for the past few months, many believed that the impact would not be as significant on Vietnam as on other countries, as the local monetary policy is different by directly affecting the money supply through credit growth. Even the interest rate cut in last July has had a very limited impact on the lending interest rate level in the market.

“The SBV’s decision to lower rates is more for orienting the market, thus reinforcing the trend of reducing lending rates that some banks made in early August for a number of priority sectors,” HSBC’s head of global markets Ngo Dang Khoa told VIR.

A general director of a commercial bank also told VIR, “The actual inflows of cash to the financial market might be lower or not remarkable as expected. So we do not need to worry about distortions on the asset market or real estate bubble.” VIR

Luu Luu

Vietnam will not use exchange rate as tool to boost exports: central bank

Vietnam will not use exchange rate as tool to boost exports: central bank

The central bank believes that for an open economy like Vietnam, the sharp devaluation of the local currency will not help boost exports, but will do more harm than good.

VN Central Bank cuts interest rate in cautious step

VN Central Bank cuts interest rate in cautious step

Applauding the State Bank of Vietnam’s move to cut the prime interest rate, experts said the 0.25 percentage point cut, however, is relatively modest.

Interest rates stay steady til year end: VN Central Bank official

Interest rates stay steady til year end: VNCentral Bank official

With a positive macroeconomic background at the moment, interest rates will basically stay steady until the end of the year due to excessive liquidity and proper credit growth, according to an official from the State Bank of Vietnam.

 
 

Other News

.
More than 1,100 workers stopped working due to F1 case in Pouyuen Vietnam
More than 1,100 workers stopped working due to F1 case in Pouyuen Vietnam
BUSINESSicon  10/06/2021 

The F1 case at Pouyuen Vietnam Co., Ltd. (Pouyuen Vietnam), located in Tan Tao Ward, Binh Tan District, has caused more than 1,100 workers to temporarily stop working.

Gov’t responds swiftly to COVID-19 economic impacts: ADB official
Gov’t responds swiftly to COVID-19 economic impacts: ADB official
BUSINESSicon  10/06/2021 

The Vietnamese Government has responded swiftly to the COVID-19 economic impacts, which was supported by strong fundamentals, thus ensuring the economy’s resilience, said Asian Development Bank (ADB) Country Director for Vietnam Andrew Jeffries.

Banks cut lending interest rates to lowest level in years
Banks cut lending interest rates to lowest level in years
FEATUREicon  10/06/2021 

Banks have cut lending interest rates, now at the lowest levels in many years, to help people and businesses hit hard by Covid-19.

Gov't reviews Vingroup's proposal on electric-car policy
Gov't reviews Vingroup's proposal on electric-car policy
FEATUREicon  10/06/2021 

Some Vietnamese enterprises have invested in electric-car manufacturing and charging stations, but an overall electric car strategy has yet to be developed by the government.

Apple partner Pegatron injects additional US$101million into Vietnam
Apple partner Pegatron injects additional US$101million into Vietnam
BUSINESSicon  09/06/2021 

Taiwan has granted approval for a further investment of US$101 million by Pegatron Corp, a major manufacturing partner of Apple which operates in Vietnam.

FDI supports Vietnam climb the global value chain
FDI supports Vietnam climb the global value chain
BUSINESSicon  09/06/2021 

Vietnam has successfully transformed into a manufacturing-oriented economy,
supported by stronger global value chain (GVC) participation thanks to a rise in foreign direct investment (FDI), especially in the manufacturing industry.

Business stories May 31–June 6
Business stories May 31–June 6
FEATUREicon  09/06/2021 

People who are worth VND500 trillion are listed among the top 30 richest persons in the US and the top 17 in China, according to Forbes. In Vietnam, such a person would be at the top.

PM wants to reform tax regime to prevent real estate speculation
PM wants to reform tax regime to prevent real estate speculation
BUSINESSicon  09/06/2021 

Prime Minister Pham Minh Chinh has emphasized that the national housing strategy needs to include reasonable social housing development, and the tax regime on land speculators should be adjusted.

Billions of US dollars flow into Vietnam’s stock market despite Covid-19
Billions of US dollars flow into Vietnam’s stock market despite Covid-19
FEATUREicon  09/06/2021 

The stock market has been witnessing unprecedented cash inflow so far this year, even though the Covid-19 pandemic has become more complicated in Southeast Asia.

Expanding action to weed out pandemic
Expanding action to weed out pandemic
BUSINESSicon  08/06/2021 

The prime minister has ordered a series of sturdy actions to fight against COVID-19 and spur on local production, as people look to the government for protection with the spectre of the pandemic looming yet again.

After decade of struggle, HAGL posts loss and gradually 'sinks'
After decade of struggle, HAGL posts loss and gradually 'sinks'
BUSINESSicon  09/06/2021 

The Hoang Anh Gia Lai Group (HAGL) of Chairman Doan Nguyen Duc has gradually withdrawn from the fields of business Duc has been dedicated to for a decade. 

Vietnam a bright spot for foreign investors: experts
Vietnam a bright spot for foreign investors: experts
BUSINESSicon  08/06/2021 

Vietnam has been chosen among leading destinations in Southeast Asia by Japanese investors, Nakajima Takeo, Chief Representative of the Japan External Trade Organisation (JETRO) in Hanoi, has said.

FDI inflows remains spotlight of Vietnam's economy
FDI inflows remains spotlight of Vietnam's economy
BUSINESSicon  09/06/2021 

The government has set up an FDI task force to support multinationals and foreign businesses grasping investment opportunities in Vietnam.

Businesses need more effective support amid COVID-19
Businesses need more effective support amid COVID-19
BUSINESSicon  08/06/2021 

Like many countries, Vietnam may have to depend on vaccines to achieve herd immunity and be virus-free, but enterprises may not be able to wait. They are in dire need of help and are craving new momentum to return to a “real normal” situation.

Vietnam expects to see export growth in rising global demand
Vietnam expects to see export growth in rising global demand
BUSINESSicon  08/06/2021 

Global demand for goods is recovering and this is an opportunity for Vietnam to boost its exports of consumer and industrial products, according to the Ministry of Industry and Trade (MoIT).

Stock market an attractive investment channel for local players
Stock market an attractive investment channel for local players
BUSINESSicon  08/06/2021 

The stock market is still an attractive investment channel for investors in the near future. However, it also poses many challenges for regulators and market members, said experts.

Vietnam calls for initiatives to ensure efficient functioning of APEC supply chains
Vietnam calls for initiatives to ensure efficient functioning of APEC supply chains
VIETNAM & WORLDicon  07/06/2021 

Asia-Pacific Economic Cooperation (APEC) economies needs to continue promoting free and open trade and investment, undertake initiatives to ensure regional supply chains to function smoothly and efficiently,

Vietnam faces shortage of cold storage warehouses
Vietnam faces shortage of cold storage warehouses
FEATUREicon  09/06/2021 

The growing tendency of consumers shopping online globally has led to a sharp demand for cold storage warehouses, but investment in cold storage facilities remains modest.

E-newspapers, ad agents urge amending of Advertisement Law
E-newspapers, ad agents urge amending of Advertisement Law
FEATUREicon  10/06/2021 

The Ministry of Culture, Sports and Tourism (MCST) will review the Advertisement Law and collect opinions to propose amendments that would allow press agencies to compete with cross-border platforms.

Small tourism businesses struggle to adapt to COVID-19
Small tourism businesses struggle to adapt to COVID-19
BUSINESSicon  07/06/2021 

The fourth wave of COVID-19 infections in Vietnam has caused disruptions to most sectors once again as the country was preparing for the tourism season.

 
 
 
Leave your comment on an article

OR QUICK LOGIN