The State Bank of Vietnam (SBV) has cut regulatory interest rates for four consecutive times since the beginning of this year, in the context that world interest rates continue to rise and stay at a high level.
The central bank’s decisions clearly reflect its efforts to support economic growth through the credit channel.
An employee counts Vietnamese banknotes at a bank in Hanoi.
At present, the interest rate level basically remains stable, with deposit and lending interest rates tending to decrease gradually. The average deposit interest rate of commercial banks is about 5.8% per year, down 0.7% compared to the end of 2022, while the average lending interest rate in Vietnamese dong is about 8.9% a year, down 1%.
The SBV’s decision to continue reducing regulatory interest rates establishes a reduction trend for the market in the coming time, thereby orienting credit institutions to take more drastic steps to reduce lending rates and accompany businesses and people to contribute to promoting economic growth and recovery, said SBV Standing Deputy Governor Dao Minh Tu.
Dr. Can Van Luc, member of the National Advisory Council on Financial and Monetary Policies, said that the central bank’s move not only aims to assist banks and enterprises, and but also shows an increasingly clear sign of a shift in the monetary policy from being cautious to being loosened.
Along with reducing interest rates, economists expect the SBV will have more solutions to increase the money supply, which has increased very slowly in the first half of this year. SBV Deputy Governor Tu said that in February 2023, the State Bank assigned a credit growth limit to commercial banks nationwide at 11%, following the year-long orientation of 14-15%.
However, by June 15, the economy’s credit was still gloomy, standing at VND12.32 quadrillion (US$524 billion), up 3.36% from the end of 2022, and 8.94% year-on-year, which showed weak absorption of the economy.
Dr. Luc proposed the central bank speed up the restructuring of credit institutions with weak performances in order to minimise unhealthy competition in interest rates.
The Government should make more drastic directions to improve the business and investment environment, and increase fiscal support measures for businesses, he added.