Central bank in no rush to tighten monetary policy: broker VnDirect

By Phan Ca
Sun, June 19, 2022 | 9:06 am GMT+7
Headquarters of the State Bank of Vietnam in Hanoi. Photo courtesy of Vietnam News Agency.

Headquarters of the State Bank of Vietnam in Hanoi. Photo courtesy of Vietnam News Agency.

The State Bank of Vietnam is in no rush to tighten monetary policy despite the U.S. Federal Reserve’s rapid interest rate hike, according to top broker VnDirect Securities.

The central bank is likely to maintain an appropriate monetary policy in order to support the economy's recovery and market stability, it said in a report.

"The SBV would not necessarily have to move in pace with the Fed, as Vietnam’s average consumer price index is predicted to be at 2.5% in the first half of 2022, significantly below the government’s target of 4%.

"In addition, domestic demand remains weak and has not fully recovered to pre-pandemic levels. Therefore, the central bank still prioritizes the goal of maintaining low interest rates to support businesses, as well as economic recovery."

However, the broker pointed out that the SBV's ability to sustain loose monetary policy is dwindling. "But any monetary tightening would only take place in the second half of 2022, probably in Q4/2022, and the increase would be limited to around 0.25-0.5%."

VnDirect expected the central bank to maintain high credit growth to support the economy's recovery. "Credit inflows will be prioritized to the manufacturing and service sectors, especially industry, import and export, agriculture, forestry, and fisheries."

The SBV will strictly control the credit inflow into high-risk sectors like real estate, securities, and build-operate-transfer projects, the broker added. "We maintain our prediction of high credit growth at 14% year-on-year in 2022."

The central bank is implementing an interest rate support package worth up to VND43,000 billion ($1.85 billion). VNDirect projected that the support would contribute to a 20-40 basis point reduction in the average interest rate in 2022. However, the actual support may be reduced if commercial banks boost lending rates on other conventional loans to offset the increases in deposit interest rates.

Deposit rates are expected to grow as a result of rising US dollar interest rates and inflationary pressures in Vietnam. However, the increase would be minor, amounting to about 30-50 basis points untill the end of 2022. The broker predicted that commercial banks' interest rate of 12-month term deposits can increase to 6.0-6.2% per year by the end of this year, from the current 5.7%, which is still lower than the pre-pandemic level of 7%.

The broker in a previous report stated that the "Vietnamese dong remains one of the most stable currencies in the Asia-Pacific region". As the fundamental factors supporting the value of the Vietnamese dong remain robust in 2022, including a current account surplus and high foreign exchange reserves, the appreciation of the U.S. dollar should have little impact on Vietnam's exchange rate.

Rising fuel and raw material prices drove up Vietnam's consumer price index (CPI) in May by 0.38% against April, and 2.86% year-on-year, according to General Statistics Office.

HSBC this week revised down its forecast on Vietnam’s inflation this year to 3.5% from the 3.7% it predicted in May due to stable domestic food prices.

In April, Standard Chartered forecast Vietnam’s inflation in 2022 and 2023 at 4.2% and 5.5% respectively, due to supply-side factors including rising commodity prices, especially given the current global geopolitical tension.

Comments (0)
  • Read More
Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year

Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year

Vietnam’s central province of Quang Ngai will work with the investor to have construction of VSIP II Quang Ngai, a facility based on the Vietnam-Singapore Industrial Park (VSIP) model, begin in August 2025.

Industrial real estate - Sat, November 2, 2024 | 3:47 pm GMT+7

Vietnam likely to grow 6.5% in 2024-2025: VinaCapital

Vietnam likely to grow 6.5% in 2024-2025: VinaCapital

VinaCapital, among the biggest foreign-run asset managers in Vietnam, has forecast the country’s economy to achieve 6.5% growth in both 2024 and 2025, with the composition of the expansion to change to more domestically driven factors next year.

Economy - Sat, November 2, 2024 | 2:00 pm GMT+7

Major Vietnamese developer Novaland appoints new CEO

Major Vietnamese developer Novaland appoints new CEO

Duong Van Bac, who joined Novaland as chief financial officer in August 2023, has been appointed general director, starting Friday.

Companies - Sat, November 2, 2024 | 10:24 am GMT+7

Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3

Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3

Ho Chi Minh City-based Bamboo Capital Group recorded an after-tax profit of VND331.2 billion ($13.1 million) in the third quarter of 2024, an astounding 36-fold expansion year-on-year.

Bamboo Capital - Sat, November 2, 2024 | 9:41 am GMT+7

ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout

ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout

Vietnam Beverage, wholly owned by Thai Beverage (ThaiBev) will rake in VND1,374 billion ($54.26 million) worth of dividend from Ho Chi Minh City-based top brewer Sabeco.

Companies - Sat, November 2, 2024 | 9:13 am GMT+7

Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex

Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex

Leading Vietnamese steelmaker Hoa Phat had invested more than VND52.5 trillion ($2.08 billion) in its Dung Quat Iron and Steel Integrated Complex (Dung Quat 2) in the central province of Quang Ngai as of Q3/2024.

Industries - Sat, November 2, 2024 | 8:00 am GMT+7

Vietnam becomes Australia’s fastest-growing inbound market

Vietnam becomes Australia’s fastest-growing inbound market

The number of Vietnamese tourists to Australia has grown significantly after the Covid-19 pandemic, with nearly 178,000 reported in the 12 months to August 2024, according to a Friday press release by the Australian Minister for Trade and Tourism’s Office.

Southeast Asia - Fri, November 1, 2024 | 10:02 pm GMT+7

Study finds shift in Thai consumers’ spending patterns

Study finds shift in Thai consumers’ spending patterns

Consumers in Thailand are shifting their spending focus to experiences and investments, according to the latest ASEAN Consumer Sentiment Study (ACSS) by United Overseas Bank (UOB).

Southeast Asia - Fri, November 1, 2024 | 10:00 pm GMT+7

Energy security, digitalization key to Indonesia's economic growth

Energy security, digitalization key to Indonesia's economic growth

The Indonesian government is prioritizing long-term economic growth through energy security, digitalization, and natural resource industrialization, according to Deputy Minister of Finance Thomas Djiwandono.

Southeast Asia - Fri, November 1, 2024 | 9:58 pm GMT+7

Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM

Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM

Prime Minister Pham Minh Chinh’s freshly ended six-day trip to the UAE, Saudi Arabia and Qatar has produced important outcomes, demonstrating the growing relations between Vietnam and the three Middle-East countries, Deputy Prime Minister and Foreign Minister Bui Thanh Son told the Vietnam News Agency.

Politics - Fri, November 1, 2024 | 9:25 pm GMT+7

Vietnam, Qatar look to tap potential for energy, oil & gas collaboration

Vietnam, Qatar look to tap potential for energy, oil & gas collaboration

Vietnam and Qatar have recognized the significant potential for further collaboration in multiple sectors such as energy, oil and gas, especially LNG, agriculture, Halal industry, and banking.

Politics - Fri, November 1, 2024 | 9:02 pm GMT+7

Thailand bans export of raw palm oil until December

Thailand bans export of raw palm oil until December

Thailand's Department of Internal Trade has temporarily banned the export of raw palm oil due to reduced production caused by drought and plant diseases.

Southeast Asia - Fri, November 1, 2024 | 8:31 pm GMT+7

Envision Energy to build $420 mln wind power plant in Vietnam from June 2025

Envision Energy to build $420 mln wind power plant in Vietnam from June 2025

Envision Energy Singapore Pte Ltd, under China-based Envision Energy, aims to kick off construction of the 300-MW Envision Nam Po wind power plant in Vietnam’s northern mountainous province of Dien Bien in June 2025.

Energy - Fri, November 1, 2024 | 8:30 pm GMT+7

Indonesia to ban plastic waste imports from 2025

Indonesia to ban plastic waste imports from 2025

The Indonesian government will start imposing a ban on the import of plastic waste from the beginning of next year, according to Minister of Environment Hanif Faisol Nurrofiq.

Southeast Asia - Fri, November 1, 2024 | 8:29 pm GMT+7

Islamic economy makes up 48% of Indonesia’s GDP

Islamic economy makes up 48% of Indonesia’s GDP

The contribution of Islamic business activities to Indonesia’s GDP has been estimated at 48%, local authorities reported at the 11th Indonesia Sharia Economic Festival (ISEF).

Southeast Asia - Fri, November 1, 2024 | 8:28 pm GMT+7

Restructured construction giant Tracodi gets set to execute ambitious plans

Restructured construction giant Tracodi gets set to execute ambitious plans

After changing its name and restructuring as a group, Tracodi Construction Holdings JSC (HoSE: TCD), a member of Bamboo Capital Group (HoSE: BCG), has completed a leadership shake-up and is poised to achieve rapid growth.

Bamboo Capital - Fri, November 1, 2024 | 4:43 pm GMT+7