Prime minister demands lower interest rates to spur growth

Vietnamese PM Pham Minh Chinh has urged state-run commercial banks to cut both deposit and lending rates to support businesses and help revive the slowing economy.

Chairing a cabinet meeting on Tuesday, the government leader ordered the State Bank of Vietnam (SBV) and the banking sector to implement additional policies to help speed up the economic recovery and provide support for businesses across the country.

Additional support for businesses and residents is regarded as a top priority to stem the slow that has resulted from weak import orders and domestic demand, along with prolonged property market woes.

The PM said policies issued by the central bank regarding the finance and banking sector have resulted in positive feedback from the business community and public.

For state-run commercial banks, he said they need to reduce deposit and lending rates on the basis of ensuring a balance between inflation and exchange rates to encourage people to deposit money.

Production sectors such as seafood, textiles, and wood processing have been struggling to access credit, while import orders are on the decline due to prolonged global economic headwinds.

In the first three months of this year, Vietnam’s seafood exports dropped by 27.5% year-on-year, equivalent to the fall witnessed during the most severe Covid-19 outbreaks, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

The association forecast that the industry will continue to face a tough year due to low demand from major markets like the U.S., Europe, and Japan.

Falling exports mean slower cash flow for companies amid limited access to capital sources, so lower lending rates from banks would offer financial support.

The PM said government agencies and ministries must stand side-by-side with businesses to find solutions for these challenges.

The SBV said on Monday it will restructure loans for some businesses that are facing difficulties, including delaying loan repayments by up to 12 months, as it seeks to shore up the slowing economy. These restructuring measures will be implemented through June 2024.

The PM at the weekend asked the central bank to draft a plan to target more firms for loan restructuring and extend timeframes for repayments. He also instructed the SBV to amend regulations to enable credit institutions to immediately redeem corporate bonds.

For the real estate market, Chinh said on Tuesday that it is necessary to provide capital support for developers to complete projects and introduce new products to the market.

The banking and construction industries must also accelerate the disbursement of a VND120 trillion ($5.1 billion) credit package for social housing and worker housing while avoiding any infringements. He stressed the importance of investing in affordable housing for the middle-income and low-income groups.

He directed the SBV, the Ministry of Finance, and the Ministry of Construction to use all measures possible to remove legal difficulties that have long been obstacles in the property market.

Vietnam's economic growth slowed to 3.32% in the first quarter of this year, compared to the 5.92% recorded in the fourth quarter of 2022.