Vietnam central bank seeks to keep 2023 inflation at 4.5%

The State Bank of Vietnam will manage monetary policy in a flexible way to keep inflation at 4.5% next year as the National Assembly has targeted, the central bank's Deputy Governor Dao Minh Tu said Tuesday.

This aims to stabilize the monetary and foreign exchange markets to ensure the safety of the banking system, he told a news conference in Hanoi.

Updating banks’ lending, he said loan supplies by Vietnamese banks rose 12.87% as of December 21 from the end of last year to more than VND11,780 trillion ($499.3 billion).

The current lending rates are about 0.81 percentage points higher than those at the end of last year, which is low in comparison to regional and worldwide increases, the SBV deputy governor said.

Tu added that non-performing loans in the banking system were under control, and that the current ratio was about 1.92%.

So far this year, the Vietnamese dong has depreciated about 3.81% against the U.S. dollar from the end of last year, which is much lower than many other currencies worldwide, he noted.

Earlier this year, the SBV had to sell a large amount of the U.S. dollar to keep the forex stable as the greenback gained. It has also expanded the trading band to 5% from 3% to support the Vietnamese dong.

On December 5, the SBV raised its credit growth cap for the country’s banking system by 1.5-2 percentage points to 15.5-16%, citing abating external impacts and improving bank liquidity. The central bank said credit institutions with better liquidity and lower lending rates would see their credit expansion limit raised.

At the Tuesday conference, SBV Deputy Governor Tu said Ho Chi Minh City-headquartered Saigon Commercial Bank has been placed under special control, but that the joint stock bank is operating normally. In the time to come, DongA Bank, also based in HCMC, will have to undergo overall restructuring or a merger process with another bank, which is healthier, he said.

According to the General Statistics Office, the consumer price index (CPI) in November increased by 0.39% compared to October. In comparison to December last year, November’s CPI increased by 4.56%.

The index in the January-November period rose 3.02% year-on-year, while the SBV's target for the whole year is 4%. Core inflation increased by 2.38%, which reflects fluctuations in consumer prices mainly driven by the price of food and energy. Core inflation is a measure of inflation that excludes some volatile commodities like food and energy.