SBV may consider another policy interest rate cut

By Dinh Vu, Huong Dung
Fri, March 31, 2023 | 5:00 pm GMT+7

The State Bank of Vietnam (SBV) may consider another policy interest rate cut as central banks of other countries, especially the U.S. Federal Reserve, tend to ease monetary tightening and domestic inflation is kept under control.

“When possible, we will propose the SBV governor reduce policy interest rates to support the economy, which recorded a quite low growth rate in the first quarter,” Pham Chi Quang, director of the SBV’s monetary policy department, told a Friday press meeting on Q1 banking performance.

Quang added that Vietnam’s inflation in March was lower than February, but the GDP growth of 3.32% is very low, only equivalent to the rate in Q1/2020, when the country was most affected by the Covid-19 pandemic.

Pham Chi Quang, director of the State Bank of Vietnam's Monetary Policy Department. Photo courtesy of the central bank.

Pham Chi Quang, director of the State Bank of Vietnam's Monetary Policy Department. Photo courtesy of the central bank.

"In Q1, most key sectors like processing and manufacturing, mining, and consumption declined, leading to low credit growth as demand shrank. Meanwhile, the banking system boasted high liquidity, reflected in commercial banks’ huge deposit at the SBV that has exceeded the required reserve level since February, and sharply decreasing interbank interest rates.

"In that context, the government and the SBV are looking forward to further cutting interest rates to support the economy,” Quang explained.

In the first two months of the year, the SBV kept the policy interest rates unchanged to stabilize the market, amid continuously rising world interest rates and high inflation pressure.

In mid-March, based on actual developments in the domestic economy, the regulator revised down some policy interest rates by 1 percentage point and asked commercial banks to further reduce deposit rates.

SBV Deputy Governor Dao Minh Tu said that by March 28, credit of the whole economy increased by 2.06% compared to the end of 2022 and up 11.17% year-on-year. Meanwhile, bank credit growth for the whole year is set at about 14-15%.

He attributed the low credit growth in Q1 to the global economic slowdown that resulted in fewer orders and suspended or narrowed production, affecting capital demand.

"After working with associations and businesses, we acknowledged that the main reason for the low credit growth in the first months of the year was enterprises' weak demand," Tu added.

At a seminar entitled “Unleashing capital flows into production and business" on Thursday, many businesses reported that they are facing huge difficulties amid the economic gloom.

Chairman of the Ho Chi Minh City Business Association (HUBA) Nguyen Ngoc Hoa said that key export-oriented manufacturing industries like garment, seafood and wood saw record low growth, along with the "frozen" real estate market. Several steel and cement companies have halted 90% of their operations.

"Businesses are trying to maintain operations in the context of reduced demand, so they have no need for loans for production and business,” he said, expressing their urgent desire for debt rescheduling and interest rate reduction from banks.

Regarding solutions to support enterprises facing liquidity difficulties, the SBV representative said that the central bank has proposed a mechanism to extend and delay debt payments for struggling businesses. However, it must make careful considerations on beneficiaries and the scope of application to ensure a balance with the capital flows of commercial banks.

From March 15, the annual rediscount rate fell from 4.5% to 3.5%, while the overnight electronic interbank rate and interest rate for loans to offset capital shortfalls in clearance between the central bank and domestic banks dropped from 7% to 6%.

The maximum short-term lending interest rate in Vietnamese dong for priority sectors was also cut from 5.5% to 5% per year. The maximum short-term lending rate in Vietnamese dong at public credit funds and microfinance institutions decreased from 6.5% to 6% per year.

Comments (0)
  • Read More
Vietnam plans to spend over $2 bln on US agri imports

Vietnam plans to spend over $2 bln on US agri imports

Vietnam’s Ministry of Agriculture and Environment is expected to sign MoUs to purchase over $2 billion worth of U.S. agricultural, forestry, and fishery products.

Economy - Tue, June 3, 2025 | 10:01 pm GMT+7

New flight route to help Danang attract more wealthy tourists from Middle East

New flight route to help Danang attract more wealthy tourists from Middle East

The new Dubai-Danang flight route has been launched, paving the way for an influx of high-spending travelers from the Middle East and Europe to the central Vietnam city, one of the country's top tourist attractions.

Companies - Tue, June 3, 2025 | 9:13 pm GMT+7

Food giant C.P. Vietnam’s 'diseased' pigs improperly quarantine-stamped: authorities

Food giant C.P. Vietnam’s 'diseased' pigs improperly quarantine-stamped: authorities

The widely circulated images of diseased pigs from C.P. Vietnam, a subsidiary of Thailand’s food giant Charoen Pokphand Foods Public Company Limited (CPF), date back to 2022, but the pigs were improperly stamped, Vietnamese authorities stated on Tuesday.

Companies - Tue, June 3, 2025 | 5:36 pm GMT+7

Son Hai Group proposes expanding 263km stretch of Vietnam's North-South Expressway

Son Hai Group proposes expanding 263km stretch of Vietnam's North-South Expressway

Vietnam’s Son Hai Group is seeking Prime Minister Pham Minh Chinh's approval to invest in the expansion of a 263-kilometer stretch of the eastern section of the North-South Expressway.

Infrastructure - Tue, June 3, 2025 | 3:53 pm GMT+7

FedEx establishes direct serve in Vietnam on surging demand

FedEx establishes direct serve in Vietnam on surging demand

FedEx Express Corporation, one of the world’s largest express transportation companies, has transitioned to a direct-serve presence in Vietnam amid the Southeast Asian country’s growing international shipping demand.

Industries - Tue, June 3, 2025 | 2:55 pm GMT+7

Vietnam’s steel giant Hoa Phat to deliver thousands of containers to domestic shipping lines  

Vietnam’s steel giant Hoa Phat to deliver thousands of containers to domestic shipping lines  

Vietnam’s largest steelmaker, Hoa Phat Group, will supply thousands of containers to VIMC Container Transport JSC (VIMC Lines) and Vinafco Shipping JSC under recently signed contracts.

Companies - Tue, June 3, 2025 | 12:16 pm GMT+7

Shinhan Bank receives 'Fastest growing SME bank Vietnam 2025' award

Shinhan Bank receives 'Fastest growing SME bank Vietnam 2025' award

South Korea’s Shinhan Bank Vietnam Limited has been named the “Fastest Growing SME Bank Vietnam 2025” by World Economic Magazine (UK).

Companies - Tue, June 3, 2025 | 10:19 am GMT+7

Vietnam’s ‘shrimp king' Minh Phu expects to return to profit in 2025

Vietnam’s ‘shrimp king' Minh Phu expects to return to profit in 2025

Minh Phu Seafood Corporation (UPCoM: MPC), Vietnam’s leading shrimp exporter, expects net profit to reach VND997 billion ($38.03 million) this year, reversing the loss in 2024.

Companies - Tue, June 3, 2025 | 8:38 am GMT+7

CMC Corporation breaks ground on $300 mln technology hub in Hanoi

CMC Corporation breaks ground on $300 mln technology hub in Hanoi

Vietnam's leading technology firm CMC Corporation on Monday broke ground on its $300 million Hanoi CMC Creative Space (CCS Hanoi) project.

Industries - Mon, June 2, 2025 | 11:19 pm GMT+7

Thailand’s industrial output up after 9-month decline

Thailand’s industrial output up after 9-month decline

Thailand’s industrial output has turned positive for the first time in nine months, with the automotive sector rebounding after a 21-month slump, said Thai Deputy Finance Minister Paopoom Rojanasakul.

Southeast Asia - Mon, June 2, 2025 | 10:48 pm GMT+7

Singapore, France to expand cooperation in civil nuclear energy, defence technology, AI research

Singapore, France to expand cooperation in civil nuclear energy, defence technology, AI research

Singapore and France have upgraded their Strategic Partnership signed in 2012 to a Comprehensive Strategic Partnership (CSP), marking Singapore's first CSP with a European country.

Southeast Asia - Mon, June 2, 2025 | 10:47 pm GMT+7

Masan MEATLife stock jumps on continued profit momentum

Masan MEATLife stock jumps on continued profit momentum

The ticker of Masan MEATLife (MML), a subsidiary of Vietnamese consumer retail giant Masan Group, jumped by 8.71% to VND31,200 ($1.2) per share on Monday, after it reported profit for the third consecutive quarter in Q1/2025.

Companies - Mon, June 2, 2025 | 10:34 pm GMT+7

Vietnam's VSIP Binh Dinh industrial park seeks to become 'golden destination' for Thai firms

Vietnam's VSIP Binh Dinh industrial park seeks to become 'golden destination' for Thai firms

The Becamex VSIP Binh Dinh service-urban-industrial complex in the central province of Binh Dinh is emerging as a promising destination for Thai enterprises, said its developer Becamex Binh Dinh JSC.

Industrial real estate - Mon, June 2, 2025 | 10:24 pm GMT+7

Termination of feed-in-tariff mechanism a major bottleneck in Vietnam’s electricity transition: expert

Termination of feed-in-tariff mechanism a major bottleneck in Vietnam’s electricity transition: expert

A major bottleneck in Vietnam’s electricity transition has been the termination of the feed-in-tariff (FIT) mechanism in 2021, with no suitable replacement mechanism in place, according to the director of Hanoi-based Institute of Energy Technology.

Economy - Mon, June 2, 2025 | 4:56 pm GMT+7

Vietnam Vaccine JSC launches high-quality healthcare shop chain

Vietnam Vaccine JSC launches high-quality healthcare shop chain

Vietnam Vaccine JSC (VNVC), well known for its vacciation services, on Saturday launched its VNVC Shop, a chain offering safe, high-quality healthcare products from globally recognized brands.

Companies - Mon, June 2, 2025 | 4:05 pm GMT+7

Vietnam heavyweight PV Gas plans $3 bln investment over next 5 years

Vietnam heavyweight PV Gas plans $3 bln investment over next 5 years

PV Gas, a subsidiary of state-owned giant Petrovietnam, plans to make "strong investment" over the next five years in areas such as infrastructure and import-distribution of LNG.

Energy - Mon, June 2, 2025 | 2:01 pm GMT+7