Vietnam expected to cut policy rate in second half of 2020: HSBC

The need to ease policy rates in the near-term is unlikely, given the country’s still-robust growth and heightened foreign direct investment.

As global demand continues to fade, the State Bank of Vietnam (SBV), the country's central bank, is expected to provide some form of stimulus to growth, with a 25-basis-point cut to the policy rate on the cards in the second half of 2020, according to HSBC in its latest report.

Vietnam expected to cut policy rate in second half of 2020: HSBC

This would bring the refinance rate down to 6% by end-2020, which is a collateralized lending rate through which the SBV provides short-term loans for credit institutions, stated the report.

Notably, the SBV was the only regional central bank not to tighten policy last year, however, Vietnam is expected to eventually follow most countries’ easing cycle once global trade data wanes as a result of weaker global growth.

Nevertheless, the need to ease policy rates in the near-term is unlikely, given the country’s still-robust growth and heightened foreign direct investment.


Vietnam expected to cut policy rate in second half of 2020: HSBC
Lending rates in Vietnam are more closely correlated with interbank rates.

 

In addition to controlling the rates at which SBV lends to banks, the SBV also has various benchmarks intended to control broader lending rates, with a focus on ensuring banks do not charge excessive rates to the real economy. This reflects the central bank’s credit growth mandate, targeting 14% in 2019, which is unchanged from the previous year.

​Monetary policy transmission in Vietnam relies primarily on its two lending facilities: the refinancing and discount facilities. Both are collateralized facilities, which form the upper and lower-bound of market lending rates from the SBV. This is also the band within which the rate for open market operations (OMO) move. OMO began in 2000 and take the form of outright sales and purchases of securities or repo agreements.

It is also important to mention that the SBV manages the local exchange rate, which it has been guiding on a very gradual depreciation path. The central bank does not appear to use the FX to boost growth or exports, and instead focuses on external stability.

However, in 2018 as the central was selling USD reserves to support the currency, liquidity in the financial system tightened sharply, putting upward pressure on lending rates even in the absence of a move in the policy rate.

Hanoitimes

 
 

Other News

.
Half of local businesses use IFRS
Half of local businesses use IFRS
BUSINESSicon  12/10/2020 

More than half of companies in Vietnam have been adopting international financial reporting standards to meet investors’ expectations and improve their corporate governance, a survey showed.

Party Resolution boosts marine economy and defence
Party Resolution boosts marine economy and defence
BUSINESSicon  12/10/2020 

The sustainable development of the marine economy in association with the consolidation of defence and security is among the important sections of a resolution from the Communist Party of Vietnam

Positive outlook ahead for economic growth in 2020
Positive outlook ahead for economic growth in 2020
BUSINESSicon  11/10/2020 

There remains plenty of room to accelerate economic growth moving into the fourth quarter of the year, with domestic consumption and investment set to be the key drivers for Vietnam’s growth during the remainder of the year, according to insiders.

Vietnam to develop livestock sector
Vietnam to develop livestock sector
BUSINESSicon  11/10/2020 

PM Nguyen Xuan Phuc has approved a plan to develop the livestock sector for the 2021-2030 period with a view to 2045.

72% of EU businesses plan to expand in Viet Nam
72% of EU businesses plan to expand in Viet Nam
BUSINESSicon  11/10/2020 

A majority of European businesses in Viet Nam expect to increase their operations in the country, the sixth Business Sentiment Survey of the EU-ASEAN Business Council released on Thursday shows.

VN eyes boosting processed meat industry
VN eyes boosting processed meat industry
BUSINESSicon  11/10/2020 

The husbandry industry is hoped to become a modern economic sector industrialised in all stages from production, processing, preservation and...

Vietnam vows to develop eco-friendly chemical industry
Vietnam vows to develop eco-friendly chemical industry
BUSINESSicon  10/10/2020 

Nguyen Van Thanh, director general of the Vietnam Chemical Agency, speaks about some of the strengths and weaknesses in the 2007 Law on Chemicals.

Banks put pedal to the metal in digital transformation
Banks put pedal to the metal in digital transformation
BUSINESSicon  10/10/2020 

The banking industry has been recently abuzz with digital transformation as lenders embark on their journey to become more tech-enabled to keep pace with disruptive technologies.

12 loss-making mega-projects proceed slowly
12 loss-making mega-projects proceed slowly
BUSINESSicon  10/10/2020 

The assets of the 12 loss-making mega-projects under the Ministry of Industry and Trade (MOIT) total VND59.1 trillion, while total accounts payable is VND63.3 trillion.

Vietnamese businesses wait for new rescue package
Vietnamese businesses wait for new rescue package
BUSINESSicon  11/10/2020 

Most enterprises say they are still experiencing a sharp decrease in revenue, cash flow imbalance and decline in confidence.

Equitisation doesn't necessarily mean a better future for SOEs
Equitisation doesn't necessarily mean a better future for SOEs
BUSINESSicon  10/10/2020 

Equitisation should be a magic wand to improve the performance of a State-owned enterprise (SOE), but in some cases, it is not.

Banks push bancassurance amid low credit growth
Banks push bancassurance amid low credit growth
BUSINESSicon  09/10/2020 

Banks are pushing the sale of life insurance products (bancassurance) in the context of low credit growth since the beginning of this year due to the impacts of the COVID-19 pandemic.

Sound direction for Vietnam’s chances of economic revival
Sound direction for Vietnam’s chances of economic revival
BUSINESSicon  09/10/2020 

Despite heavy aftermaths caused by the global health crisis, the Vietnamese economy remains in positive growth in the first nine months of the year on the back of the government’s sound responses to curb the pandemic return.

Reforms to cut unwanted administrative processes
Reforms to cut unwanted administrative processes
BUSINESSicon  09/10/2020 

In a bid to boost institutional reforms towards a modern market economy, further abolishing and reducing business regulations to create a bigger space for the private sector to develop will serve as a new driving force 

Rising handling charges neccessary to advance
Rising handling charges neccessary to advance
BUSINESSicon  09/10/2020 

International shipping lines are expected to face an increase of 12 per cent in domestic container handling service charges at Vietnamese seaports from early 2022, triggering concerns over a possible charge burden on local shippers.

Fish sauce producers in a tight spot
Fish sauce producers in a tight spot
BUSINESSicon  09/10/2020 

Traditional fish sauce is one of the most typical components in Vietnamese cuisine and while its nutritional value has been analysed thoroughly, getting EU customers to consume it more regularly remains a challenge.

Tra fish famers, exports hit hard by Covid-19 pandemic
Tra fish famers, exports hit hard by Covid-19 pandemic
BUSINESSicon  09/10/2020 

Tra (pangasius) fish prices have dropped to their lowest levels in 11 years since exports have been hit by Covid-19, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

September surprise: fruit prices soar to record high
September surprise: fruit prices soar to record high
BUSINESSicon  09/10/2020 

Passion fruit, pomelo, dragon fruit and fresh coconut have been exported to Europe in large quantities under the EVFTA, which took effect this year.

Mystery businessmen pours VND150 billion into ITA, Dang Thi Hoang Yen makes surprise move
Mystery businessmen pours VND150 billion into ITA, Dang Thi Hoang Yen makes surprise move
BUSINESSicon  09/10/2020 

The ITA shares of the Tan Tao Group unexpectedly witnessed an impressive trading session with a record high trading volume.

SOE equitization: state takes loss, and investors lose money
SOE equitization: state takes loss, and investors lose money
FEATUREicon  12/10/2020 

Many state-owned enterprises (SOEs) have been equitized but have not seen considerable changes as the state's ownership ratio remains high. Many of them are still taking losses and struggling to survive.

 
 
 
Leave your comment on an article

OR QUICK LOGIN