SBV may consider another policy interest rate cut
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.
"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.
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