VietNamNet Bridge – The National Finance Supervision Council (NFSC) has said he can see the possibility of slashing the ceiling deposit interest rate further to 7 percent, thus paving the way for the lending interest rate reduction to 10 percent per annum.

While commercial banks have affirmed that they would not cut down the interest rates further because the move would block the capital inflow to banks, NFSC has said it still can see the opportunities to slash the interest rates further.

Government officials and businesses have become impatient on the slow lending growth. By March 21, 2013, the outstanding loans had increased by 0.03 percent over December 31, 2012, while the mobilized capital had increased by 3.86 percent.

12 percent credit growth rate target is challenging

The finance supervision council has noted the interest rate downward trend in recent days; even though the interest rates have been yet become low enough for businesses.

Since banks still cannot push up lending, they have been injecting money in the government bonds, which proves to be the most attractive investment channel for them now thanks to the low risk.

The existing bad debts remain a big obstacle for businesses to access bank loans. If the current situation cannot be improved, the targeted 12 percent credit growth rate would be unattainable.

The inflation rate of the whole year 2013 is expected to be at 6-7 percent per annum. The market weak demand in the first 3 months of the year plus the low credit growth rate both would make easier for the government to curb the inflation.

The experts who have made a review over the consumer price index (CPI) increase of the last 10 years, have found out that the inflation rate in the first quarter is always equal to 40 percent of the rate of the whole year. If the economic law occurs this year, the inflation rate is likely to be below 7 percent.

“As such, it is absolutely possible for commercial banks to slash the deposit interest rate to 7 percent and the lending interest rate to 10 percent,” the NFSC’s report reads.

2013’s GDP would be higher than 2012’s

The higher GDP growth rate in the first quarter of 2013 in comparison with the same period of the last year would allow Vietnam to obtain the higher GDP growth in 2013.

If the current growth pace continues and if there are no big changes in the last months of the year, the GDP growth rate would be 5.3 percent, according to NFSC.

Nevertheless, the institution has warned that the national economy is still facing a lot of difficulties. The weak productivity of enterprises and the low market demand may lead to the low consumption level in 2013.

Exports are considered the driving force for the national economy development. However, the goods prices in the world are believed to decrease in 2013, which means lower values for Vietnamese exports.

Regarding the dong/dollar exchange rate, NFSC believes that the exchange rate would be stabilized thanks to the trade balance surplus and the improved short term investments.

Unlike many economists, who have repeatedly urged to devaluate the dong to help boost exports, NFSC believes that stabilizing the exchange rate is the priority task for now, because Vietnam now strives for the macroeconomic stability and inflation congestion.

Phuoc Ha